EconPapers    
Economics at your fingertips  
 

A spatial dominance approach to evaluate the performance of stocks and bonds: Does the investment horizon matter?

Raul Ibarra

The Quarterly Review of Economics and Finance, 2013, vol. 53, issue 4, 429-439

Abstract: The common advice by practitioners is to allocate a greater proportion of stocks for long-term investors than for short-term investors. However, part of the academic literature disagrees with this advice. We use a spatial dominance test which is suited for comparing alternative investments for a given time horizon. Using daily data for the US from 1962 to 2012, we test for dominance of cumulative returns series for stocks versus bonds at different investment horizons from 1 to 15 years. We find evidence that bonds second order spatially dominate stocks for horizons from 1 to 4 years. In contrast, for horizons of 6 years and longer, we find evidence that stocks dominate bonds. The conclusion that bonds dominate stocks at short horizons, while stocks dominate bonds at long horizons is consistent across different periods and international markets. When different portfolios of stocks and bonds are compared, we find that for long investment horizons only those portfolios with a sufficiently high proportion of stocks are efficient in the sense of spatial dominance.

Keywords: Investment decisions; Investment horizon; Stochastic dominance (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976913000215
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Stocks, Bonds and the Investment Horizon: A Spatial Dominance Approach (2011) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:53:y:2013:i:4:p:429-439

DOI: 10.1016/j.qref.2013.03.001

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-04-11
Handle: RePEc:eee:quaeco:v:53:y:2013:i:4:p:429-439