Estimating the Probability of a Lost Decade for U.S. and Global Equity
This paper estimates the probability of a “lost decade,” where equity investments lose value over a 10-year period. The findings are a reminder that equity investments are risky even over longer time periods, and investors should take this into consideration when making portfolio choices. It also introduces a simple method to allow the reader to combine beliefs about long-run stock returns along with computer simulated return distributions. Finally, the results for the U.S. are augmented with international data which strengthen the case for large long horizon risk.
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Volume (Year): 1 (2013)
Issue (Month): 2 ()
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