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Equity vs. Bonds for Long-term Investors

Author

Listed:
  • Alexander E. Abramov

    (Institute for Applied Economic Research, Russian Presidential Academy of National Economy and Public Administration)

  • Alexander D. Radygin

    (Russian Presidential Academy of National Economy and Public Administration; Gaidar Institute for Economic Policy)

  • Maria I. Chernova

    (Institute for Applied Economic Research, Russian Presidential Academy of National Economy and Public Administration)

Abstract

The paper presents a comparative analysis of investment potential of equity and bonds for long-term investors. It continues our previous research (A. Abramov, A. Radygin, M. Chernova, 2015) on the influence of investment horizon on risk-return trade-off between equity and bonds. This article discusses in detail the issue of asset allocation between equity and bonds for pension funds’ portfolio. The study is based on the approach that involves constructing portfolios with the same start date. This analysis confirms the hypothesis of the absence of significant influence of investment horizon extending on comparative advantages of equity versus bonds by risk-return criteria. The results are confirmed with the evidence from Russian and American financial markets. Because of this fact asset management of pension savings focuses on bond investment rather than on equity investment in most OECD countries.

Suggested Citation

  • Alexander E. Abramov & Alexander D. Radygin & Maria I. Chernova, 2016. "Equity vs. Bonds for Long-term Investors," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 26-44, June.
    • Handle: RePEc:fru:finjrn:160303:p:26-44
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    Citations

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    Cited by:

    1. Olga S. Belomyttseva & Larisa S. Grinkevich & Anastasiia M. Grinkevich & Samo Bobek & Polona Tominc, 2018. "Tax incentives for bond-oriented individual investors: evidence from the Russian Federation," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 4(2), pages 108-124.

    More about this item

    Keywords

    pension savings; long-term investment; investment horizon; equity and bond return; equity and bond risk; portfolio diversification;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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