Why Should Naive Investors Avoid Stock Markets ?

Michael Donadelli and Federico Silvestri
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Federico Silvestri: Allianz Investment Management Spa Milan

No 2010_19, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: The goal of this paper is to present an original and simple analysis aimed to understand why investing in capital markets can be very dangerous for �naive investors�. Stock markets are characterized by instability and subjected to external shocks. The probability of making money on them is often very low, especially in high volatility periods. We will show that, in absence of any �wise� asset allocation strategy and not being professional investors, a risk-free portfolio may perform better than a portfolio composed entirely by risky assets.

Keywords: Asset Allocation; Investment Strategies; Stock Markets; Risk-Free Securities (search for similar items in EconPapers)
JEL-codes: G01 G10 G11 G15 (search for similar items in EconPapers)
Pages: 19
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2010_19

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