search query: @author Albrecht, T. / total: 4
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| Author: | Albrecht, T. |
| Title: | The mean-variance framework and long horizons |
| Journal: | Financial Analysts' Journal
1998 : JUL/AUG, VOL. 54:4, p. 44-49 |
| Index terms: | Portfolio management Risk USA |
| Language: | eng |
| Abstract: | Some have argued that low-risk investments grow more attractive at longer investment horizons as their Sharpe ratios improve relative to high-risk investments. The paper rejects this view by showing that the long-term standard deviation of returns can be misleading as an indicator of risk. Because of compounding, investments with identical standard deviations can have entirely different long-term risk characteristics even if all instantaneous investment returns are normally distributed. In addition, even if individual investor accepts standard deviation of long-term returns as measure of long-term risk, the relative attractiveness of high-risk investments can be kept constant by proper portfolio adjustments. |
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