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Stocks, Bonds, Risk, and the Holding Period: An International Perspective

Javier Estrada

IESE Business School

December 1, 2011

The time diversification controversy, one of the most contentious issues in asset allocation, refers to the relationship between risk and the holding period. One of the aspects of this controversy is related to whether stocks become more or less risky than bonds as the holding period lengthens. To be sure, this question does not have an unequivocal answer. But the bulk of the comprehensive evidence analyzed in this article, spanning over 19 countries and 110 years, suggests that time does diversify risk. In other words, although not all results point in exactly the same direction, the overall picture that emerges is that as the holding period lengthens stocks do become less risky than bonds. This conclusion follows from an analysis based on two ways of assessing returns and several ways of assessing risk.

Number of Pages in PDF File: 27

Keywords: risk, holding period, time diversification, asset allocation

JEL Classification: G11

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Date posted: December 12, 2011  

Suggested Citation

Estrada, Javier, Stocks, Bonds, Risk, and the Holding Period: An International Perspective (December 1, 2011). Available at SSRN: http://ssrn.com/abstract=1971095 or http://dx.doi.org/10.2139/ssrn.1971095

Contact Information

Javier Estrada (Contact Author)
IESE Business School ( email )
IESE Business School
Av. Pearson 21
Barcelona, 08034
+34 93 253 4200 (Phone)
+34 93 253 4343 (Fax)
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