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| Author: | Strong, N. Taylor, N. |
| Title: | Time Diversification: Empirical Tests |
| Journal: | Journal of Business Finance and Accounting
2001 : VOL. 28:3-4, p. 263-302 |
| Index terms: | TIME DIVERSIFICATION INVESTMENT |
| Language: | eng |
| Abstract: | This paper investigates the relationship between the performance of equity and the length of the investment horizon used by investors. The authors examine optimal portfolio time diversification and two definitions of ex ante time diversification. Using almost two centuries of US and UK data the authors find some support for the hypothesis that equity represents a significantly better investment over long investment horizons than over short investment horizons. Where this result holds, the likely explanation is mean-aversion in fixed-income asset returns. However, these results are sensitive to changes in investor risk preference, changes in utility function specification, changes in the sample period used, changes in investor constraints, and the definition of time diversification adopted. |
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