Are Stocks Really Less Volatile in the Long Run?
According to conventional wisdom, annualized volatility of stock returns is lower over long horizons than over short horizons, due to mean reversion induced by return predictability. In contrast, we find that stocks are substantially more volatile over long horizons from an investor's perspecti...
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| Veröffentlicht in: | The Journal of finance (New York) 2012-04, Vol.67 (2), p.431-478 |
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| container_end_page | 478 |
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| container_issue | 2 |
| container_start_page | 431 |
| container_title | The Journal of finance (New York) |
| container_volume | 67 |
| creator | PÁSTOR, ĽUBOŠ STAMBAUGH, ROBERT F. |
| description | According to conventional wisdom, annualized volatility of stock returns is lower over long horizons than over short horizons, due to mean reversion induced by return predictability. In contrast, we find that stocks are substantially more volatile over long horizons from an investor's perspective. This perspective recognizes that parameters are uncertain, even with two centuries of data, and that observable predictors imperfectly deliver the conditional expected return. Mean reversion contributes strongly to reducing long-horizon variance but is more than offset by various uncertainties faced by the investor. The same uncertainties reduce desired stock allocations of long-horizon investors contemplating target-date funds. |
| doi_str_mv | 10.1111/j.1540-6261.2012.01722.x |
| format | Article |
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| ispartof | The Journal of finance (New York), 2012-04, Vol.67 (2), p.431-478 |
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| language | eng |
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| source | Access via Wiley Online Library; JSTOR Archive Collection A-Z Listing |
| subjects | Asset allocation Autocorrelation Dividends Expected returns Forecasting techniques Graph theory Investment horizon Investment policy Investors Long-term analysis Mean reversion Predictability Statistical discrepancies Statistical variance Stock returns Studies Uncertainty Volatility Yield |
| title | Are Stocks Really Less Volatile in the Long Run? |
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