Stocks, bonds and the investment horizon: a test of time diversification on the French market

Gilles Sanfilippo

Quantitative Finance, 2003, vol. 3, issue 4, 345-351

Abstract: In this paper, we investigate the relative performance of stocks and bonds for various investment horizons on the French market. We use a new matched block bootstrap approach to take account of estimation risk. Furthermore, in the light of non-normality of returns, we use two different risk approaches as inputs in portfolio optimization: the traditional variance, and a downside risk measure, the semi-variance. Our results suggest that an investor should avoid bonds in the long run due to the time diversification effect.

Date: 2003
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DOI: 10.1088/1469-7688/3/4/310

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