The Long-Term Risks of Global Stock Markets

Philippe Jorion

Financial Management, 2003, vol. 32, issue 4

Abstract: This research investigates the persistence of investment risk across time horizon, a crucial issue in asset allocation decisions. Previous empirical results have focused mainly on US data and suffer from limited sample size in the analysis of long-horizon returns. Investigation of a longterm sample of thirty countries provides additional empirical evidence. The results are not reassuring. There is no evidence of long-term mean reversion in the expanded data sample. Downside risk is not reduced as the horizon lengthens. On the positive side, a globally diversified portfolio would have displayed much less downside risk than any single market.

Date: 2003
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