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Why Are Stocks So Risky?

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  • Richard W. Kopcke
  • Dan Muldoon

Abstract

With the decline in privately and publicly guaranteed benefits for pensions and health care, people increasingly must finance a greater share of their retirement expenses through their own savings. The relatively high long-term return on equity makes investments in stocks seem both an attractive and suitable means of accumulating the substantial wealth that savers will require. Yet, the 50 percent drop in the Standard & Poor’s 500 Index from May 2008 to March 2009 is only the latest reminder that stocks pose considerable risk for investors. In the past, equity returns over periods as long as 10 or 20 years have diverged substantially from their long-term averages, tarnishing the appeal of stocks even as investments for the long run...

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File URL: http://crr.bc.edu/briefs/why-are-stocks-so-risky/
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Bibliographic Info

Paper provided by Center for Retirement Research in its series Issues in Brief with number ib2009-9-23.

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Length: 10 pages
Date of creation: Nov 2009
Date of revision: Nov 2009
Handle: RePEc:crr:issbrf:ib2009-9-23

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  1. Laurent Calvet & Adlai Fisher, 2002. "Multifractality In Asset Returns: Theory And Evidence," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 381-406, August.
  2. Ľuboš Pástor & Robert F. Stambaugh, 2012. "Are Stocks Really Less Volatile in the Long Run?," Journal of Finance, American Finance Association, vol. 67(2), pages 431-478, 04.
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