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.
|Date of creation:||2010|
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- R. Mehra & E. Prescott, 2010.
"The equity premium: a puzzle,"
Levine's Working Paper Archive
1401, David K. Levine.
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