Stocks, Bonds, and the Investment Horizon

Stocks, Bonds, and the Investment Horizon

Decision-Making for the Long Run

Haim Levy


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A century ago, life expectancy was roughly 40 years, hence saving for retirement was not an important economic issue. Nowadays, life expectancy exceeds 80 years in many countries, and one should expect to live and consume many years after retirement. Thus, optimizing investments and savings for retirement, with a long planned investment horizon, has become an issue of crucial importance.

How should individuals invest for the long run? Does the optimal asset allocation between risky stocks and relatively safer bonds change with age? Is the idiom 'stocks for the long run' backed by scientific evidence? This book provides a comprehensive in-depth review of these issues, bridging theory and practice of investments for various horizons.


  • Asset Allocation and the Horizon: The Ongoing Disputes
  • The Distribution of Returns and the Horizon
  • Mean–Variance, Stochastic Dominance, and the Investment Horizon
  • Performance Indices and the Investment Horizon
  • Stocks Versus Bonds: Mean–Variance and Expected Utility Paradigms
  • Risk and the Horizon: The Discounting Cash-Flows Approach with Rothschild and Stigliz's Definition of Risk
  • Stock Risk: Do Historical Crashes Tell the Whole Story? The Black Swan Hypothesis
  • Discrete and Continous Returns and the Investment Horizon
  • Almost Stochastic Dominance Rules and the Horizon
  • Prospect Theory and the Horizon
  • The Change in the Relative Attractiveness of Stocks and Bonds with the Horizon with a Riskless Asset

Readership: MBA, MA and PhD students and researchers specialising in economics and finance. Practioners who rely on reported Sharpe ratio in selecting their investment, as well as those who employ the Mean-Variance rule for optimal diversification.

Key Features:

  • This is the only book devoted to the issue of the investment horizon, an issue which has become crucial with the increase in the life expectancy, where some investors invest for one year, and some invest for 30–40 years, namely saving for retirement