Why Should Naive Investors Avoid Stock Markets ?
AbstractThe goal of this paper is to present an original and simple analysis aimed to understand why investing in capital markets can be very dangerous for “naive investors”. Stock markets are characterized by instability and subjected to external shocks. The probability of making money on them is often very low, especially in high volatility periods. We will show that, in absence of any “wise” asset allocation strategy and not being professional investors, a risk-free portfolio may perform better than a portfolio composed entirely by risky assets.
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Bibliographic InfoPaper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2010_19.
Date of creation: 2010
Date of revision:
Contact details of provider:
Postal: Cannaregio, S. Giobbe no 873 , 30121 Venezia
Web page: http://www.unive.it/dip.economia
More information through EDIRC
Asset Allocation; Investment Strategies; Stock Markets; Risk-Free Securities;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
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.:
- Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06.
- Narayana R. Kocherlakota, 1995.
"The equity premium: it's still a puzzle,"
Discussion Paper / Institute for Empirical Macroeconomics
102, Federal Reserve Bank of Minneapolis.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- R. Mehra & E. Prescott, 2010.
"The equity premium: a puzzle,"
Levine's Working Paper Archive
1401, David K. Levine.
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