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Stocks, bonds and the investment horizon: a test of time diversification on the French market

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  • Gilles Sanfilippo

Abstract

In this paper, we investigate the relative performance of stocks and bonds for various investment horizons on the French market. We use a new matched block bootstrap approach to take account of estimation risk. Furthermore, in the light of non-normality of returns, we use two different risk approaches as inputs in portfolio optimization: the traditional variance, and a downside risk measure, the semi-variance. Our results suggest that an investor should avoid bonds in the long run due to the time diversification effect.

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  • Gilles Sanfilippo, 2003. "Stocks, bonds and the investment horizon: a test of time diversification on the French market," Quantitative Finance, Taylor & Francis Journals, vol. 3(4), pages 345-351.
    • Handle: RePEc:taf:quantf:v:3:y:2003:i:4:p:345-351
    DOI: 10.1088/1469-7688/3/4/310
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    References listed on IDEAS

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    1. Bawa, Vijay S, 1976. "Admissible Portfolios for All Individuals," Journal of Finance, American Finance Association, vol. 31(4), pages 1169-1183, September.
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    Cited by:

    1. Liam A. Gallagher & Fionnuala Ryan, 2017. "A Portfolio Approach to Assessing an Auto-Enrolment Pension Scheme for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 48(4), pages 515-548.
    2. P. A. Forsyth & K. R. Vetzal, 2017. "Robust Asset Allocation For Long-Term Target-Based Investing," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-32, May.
    3. Francis In & Sangbae Kim, 2012. "An Introduction to Wavelet Theory in Finance:A Wavelet Multiscale Approach," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 8431, August.
    4. Daniele Mancinelli & Immacolata Oliva, 2023. "Constant or Variable? A Performance Analysis among Portfolio Insurance Strategies," Risks, MDPI, vol. 11(6), pages 1-14, June.
    5. Ran Ji & Miguel A. Lejeune & Srinivas Y. Prasad, 2017. "Properties, formulations, and algorithms for portfolio optimization using Mean-Gini criteria," Annals of Operations Research, Springer, vol. 248(1), pages 305-343, January.
    6. In, Francis & Kim, Sangbae & Gençay, Ramazan, 2011. "Investment horizon effect on asset allocation between value and growth strategies," Economic Modelling, Elsevier, vol. 28(4), pages 1489-1497, July.
    7. van Staden, Pieter M. & Dang, Duy-Minh & Forsyth, Peter A., 2021. "The surprising robustness of dynamic Mean-Variance portfolio optimization to model misspecification errors," European Journal of Operational Research, Elsevier, vol. 289(2), pages 774-792.
    8. Erdemlioglu, Deniz & Joliet, Robert, 2019. "Long-term asset allocation, risk tolerance and market sentiment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 62(C), pages 1-19.
    9. Peter A. Forsyth & Kenneth R. Vetzal, 2017. "Dynamic mean variance asset allocation: Tests for robustness," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 4(02n03), pages 1-37, June.
    10. Annaert, Jan & Osselaer, Sofieke Van & Verstraete, Bert, 2009. "Performance evaluation of portfolio insurance strategies using stochastic dominance criteria," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 272-280, February.
    11. J. Annaert & S. Van Osselaer & B. Verstraete, 2007. "Performance evaluation of portfolio insurance strategies using stochastic dominance criteria," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/473, Ghent University, Faculty of Economics and Business Administration.

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