Empirical Probability Distributions of Real Return from Swedish Stock and Bond Portfolios

Andreas Graflund ()
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Andreas Graflund: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

No 2001:16, Working Papers from Lund University, Department of Economics

Abstract: This paper introduces a new non-parametric approach to integrate empirical probability functions of the real return for different investment horizons for five portfolios of Swedish stocks and bonds. In our setting the problem reduces to generating new generalizations from an empirical Markov chain. We find that the stocks yield a real return of about 7.5% and bonds about 3.0%. Our results suggest that an investor ought to avoid bonds in the long run. Finally if the investors goal is to minimize the risk of capital destruction the preferable long-run passive portfolio is a mix of bonds and stocks.

Keywords: Empirical distribution; stock returns; bond returns; real return; markovian bootstrap; MCMC (search for similar items in EconPapers)
JEL-codes: C11 C15 G10 G11 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2001-09-20, Revised 2002-01-30
New Economics Papers: this item is included in nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2001_016

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