An Asset Allocation Puzzle
AbstractThis paper examines popular advice on portfolio allocation among cash, bonds, and stocks. It documents that this advice is inconsistent with the mutual-fund separation theorem, which states that all investors should hold the same composition of risky assets. In contrast to the theorem, popular advisors recommend that aggressive investors hold a lower ratio of bonds to stocks than conservative investors. The paper explores various possible explanations of this puzzle and finds them unsatisfactory. Copyright 1997 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 87 (1997)
Issue (Month): 1 (March)
Other versions of this item:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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