Whether an investor should hold more risky assets in the long run is an issue of allocation. However, the comparison of performance between different investment horizons is not an allocation issue, but rather at timing issue. Therefore, we employ Markovian moving block bootstrap to examine the performance differences between risky portfolios and diversified portfolios over different investment horizons. The results show that Sharpe ratio estimates for all of the stock portfolios increase first and then decrease as the investment horizon lengthens. Second, the size effect only holds in the short run, but not in the long run. Third, the performances of some examined portfolios outperform that of the market portfolio in the long run, indicating an investor may be better off holding some risky assets over longer investment horizon. Fourth, balanced- and bond-fund portfolios outperform the market portfolio when the investment horizons are over 15 years, suggesting that investors can benefit from investing into these types of mutual funds in the long run.
關聯:
International Journal of Business and Finance Research, 2(1), 73-85
