Empirical Probability Distributions of Real Return from Swedish Stock and Bond Portfolios
AbstractThis paper introduces a new non-parametric approach to integrate empirical probability functions of the real return for different investment horizons for five portfolios of Swedish stocks and bonds. In our setting the problem reduces to generating new generalizations from an empirical Markov chain. We find that the stocks yield a real return of about 7.5% and bonds about 3.0%. Our results suggest that an investor ought to avoid bonds in the long run. Finally if the investors goal is to minimize the risk of capital destruction the preferable long-run passive portfolio is a mix of bonds and stocks.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2001:16.
Length: 25 pages
Date of creation: 20 Sep 2001
Date of revision: 30 Jan 2002
Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/
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Empirical distribution; stock returns; bond returns; real return; markovian bootstrap; MCMC;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hansson, Bjorn & Hordahl, Peter, 1997. " Changing Risk Premia: Evidence from a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 335-50, June.
- Paparoditis, Efstathios & Politis, Dimitris N., 2001. "A Markovian Local Resampling Scheme For Nonparametric Estimators In Time Series Analysis," Econometric Theory, Cambridge University Press, vol. 17(03), pages 540-566, June.
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