Long-Horizon Returns

28 Pages Posted: 24 May 2017 Last revised: 21 Nov 2017

See all articles by Eugene F. Fama

Eugene F. Fama

University of Chicago - Finance

Kenneth R. French

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: November 20, 2017

Abstract

We use bootstrap simulations to examine the properties of long-horizon U.S. stock market returns. Distributions of continuously compounded returns converge toward normal distributions as we extend the horizon from one to 30 years, and distributions of dollar payoffs converge toward lognormal. We also show that, though largely irrelevant at short horizons, uncertainty about the expected return has a substantial impact on uncertainty about long-horizon payoffs.

Suggested Citation

Fama, Eugene F. and French, Kenneth R., Long-Horizon Returns (November 20, 2017). Chicago Booth Research Paper No. 17-17; Fama-Miller Working Paper. Available at SSRN: https://ssrn.com/abstract=2973516 or http://dx.doi.org/10.2139/ssrn.2973516

Eugene F. Fama (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)

Kenneth R. French

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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