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On the Risks of Stocks in the Long Run:A Probabilistic Approach Based on Measures of Shortfall Risk

Author

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  • Albrecht, Peter

    (Sonderforschungsbereich 504)

  • Maurer, Raimond

    (Lehrstuhl fuer Investment, Portfolio Management und Alterssicherung)

  • Ruckpaul, Ulla

    (Sonderforschungsbereich 504)

Abstract

The present paper examines the long-term risks of a representative one-time investment in German stocks (DAX/0) in real terms relative to various risk free investments (returns of 0%, 2% and 4% in real terms) as well as relative to a representative investment in German bonds (REXP). As underlying risk measures the shortfall probability, the mean excess loss (conditional shortfall expectation) as well as the product of these two measures, the shortfall expectation have been used. One main structural result is that the mean excess loss is monotonously increasing over time. This reveals a long-term worst case-characteristic of a stock investment.

Suggested Citation

  • Albrecht, Peter & Maurer, Raimond & Ruckpaul, Ulla, 2001. "On the Risks of Stocks in the Long Run:A Probabilistic Approach Based on Measures of Shortfall Risk," Sonderforschungsbereich 504 Publications 01-12, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  • Handle: RePEc:xrs:sfbmaa:01-12
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    File URL: http://www.sfb504.uni-mannheim.de/publications/dp01-12.pdf
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    References listed on IDEAS

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    1. Philippe Artzner & Freddy Delbaen & Jean‐Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228, July.
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    Cited by:

    1. Klos, Alexander & Langer, Thomas & Weber, Martin, 2002. "Über kurz oder lang - Welche Rolle spielt der Anlagehorizont bei Investitionsentscheidungen?," Sonderforschungsbereich 504 Publications 02-49, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.

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