Why Should Naive Investors Avoid Stock Markets ?
The 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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| Length: | 19 |
| Date of creation: | 2010 |
| Handle: | RePEc:ven:wpaper:2010_19 |
| Contact details of provider: | Postal: Cannaregio, S. Giobbe no 873 , 30121 Venezia Phone: +39-0412349621 Fax: +39-0412349176 Web page: http://www.unive.it/dip.economia Email: More information through EDIRC
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References listed on IDEAS
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.:
- Mehra, Rajnish & Prescott, Edward C., 1985.
"The equity premium: A puzzle,"
Journal of Monetary Economics,
Elsevier, vol. 15(2), pages 145-161, March.
- R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- 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, 1996. "The Equity Premium: It's Still a Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 42-71, March.
- Kocherlakota, N., 1995. "The Equity Premium: It's Still a Puzzle," Working Papers 95-05, University of Iowa, Department of Economics.
- Narayana R. Kocherlakota, 1995. "The equity premium: it's still a puzzle," Discussion Paper / Institute for Empirical Macroeconomics 102, Federal Reserve Bank of Minneapolis.
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