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Portfolios for Long-Term Investors
[Rare disasters and asset markets in the twentieth century]

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  • John H Cochrane

Abstract

How should long-term investors form portfolios in our time-varying, multi-factor and friction-filled world? Two conceptual frameworks may help: first, look directly at the stream of payments that a portfolio and payout policy can produce. Second, include a general equilibrium view of the markets’ economic purpose, and the nature of investors’ different preferences, risk-taking ability, and function in that equilibrium. These perspectives can rationalize some of investors’ behaviors, suggest substantial revisions to standard portfolio theory, and help us to apply portfolio theory in a way that is useful in practice.

Suggested Citation

  • John H Cochrane, 2022. "Portfolios for Long-Term Investors [Rare disasters and asset markets in the twentieth century]," Review of Finance, European Finance Association, vol. 26(1), pages 1-42.
    • Handle: RePEc:oup:revfin:v:26:y:2022:i:1:p:1-42.
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    References listed on IDEAS

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    Cited by:

    1. Victor Olkhov, 2022. "Market-Based Asset Price Probability," Papers 2205.07256, arXiv.org, revised Feb 2024.
    2. Vukovic, Darko B. & Maiti, Moinak & Frömmel, Michael, 2022. "Inflation and portfolio selection," Finance Research Letters, Elsevier, vol. 50(C).
    3. Mork, Knut Anton & Trønnes, Haakon Andreas, 2023. "Expected long-term rates of return when short-term returns are serially correlated," International Review of Financial Analysis, Elsevier, vol. 88(C).
    4. Reus, Lorenzo, 2024. "The integral of the squared Gaussian process," Chaos, Solitons & Fractals, Elsevier, vol. 179(C).
    5. Olkhov, Victor, 2022. "Price and Payoff Autocorrelations in the Consumption-Based Asset Pricing Model," MPRA Paper 112255, University Library of Munich, Germany.

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    More about this item

    Keywords

    Portfolios; Portfolio theory; investment;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G50 - Financial Economics - - Household Finance - - - General

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