An Asset Allocation Puzzle
N. Gregory Mankiw () and
David Weil ()
American Economic Review, 1997, vol. 87, issue 1, 181-91
This paper examines popular advice on portfolio allocation among cash, bonds, and stocks. It documents that this advice is inconsistent with the mutual-fund separation theorem, which states that all investors should hold the same composition of risky assets. In contrast to the theorem, popular advisors recommend that aggressive investors hold a lower ratio of bonds to stocks than conservative investors. The paper explores various possible explanations of this puzzle and finds them unsatisfactory. Copyright 1997 by American Economic Association.
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Working Paper: An Asset Allocation Puzzle (1994)
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