Are Stocks Riskier than Bonds? Not If You Assess Risk Like Warren Buffett
7 Pages Posted: 21 Jul 2012
Date Written: July 20, 2012
Academics, practitioners, and investors essentially agree that in the short term stocks are riskier than bonds. Which of these two assets is riskier in the long term, however, is controversial. This short article explores this issue by assessing long-term risk as suggested by Warren Buffett; that is, with the probability of losing purchasing power. If risk is viewed this way, a comprehensive dataset spanning over 19 countries and 110 years clearly suggests that in the long term stocks are less risky than bonds.
Keywords: Long-term risk, short-term risk, shortfall risk, Buffett
JEL Classification: G11
Suggested Citation: Suggested Citation