Searching For Lost Decades
This paper estimates the probability of a ``lost decade'' where equity investments lose value over a ten 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, it is shown that mistaken perceptions of using arithmetic means could account for some common misconceptions about the chance of losses over a decade.
|Date of creation:||Jun 2010|
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Web page: http://www.brandeis.edu/departments/economics/
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