Risk and return VI:The long term
- Long-term returns
- Risk and the investment horizon
- Time diversification and mean reversion
- Forecasting returns: The RDM
- Forecasting probabilities
- The big picture
- Excel section
Most people think that stocks are riskier than bonds, and under some circumstances that is indeed the case. But under some other circumstances that is not so clear. Which brings us to one of the central issues discussed in this chapter: risk is a function of the investment horizon. We’ll talk about what that means, we’ll take a look at historical trends, and we’ll also discuss how to forecast both returns and the probabilities of target returns in chosen holding periods.
Let’s get this straight from the start: In ...