American Economic Review Vol. 87 No. 1 1997
An Asset Allocation Puzzle
Abstract
This paper examines popular advice on portfolio allocation among cash, bonds, and stocks. It documents that this advice is inconsistent with the mutual-fund separation theorem, which states that all investors should hold the same composition of risky assets. In contrast to the theorem, popular advisors recommend that aggressive investors hold a lower ratio of bonds to stocks than conservative investors. The paper explores various possible explanations of this puzzle and finds them unsatisfactory.
- Volume
- 87
- Issue
- 1
- Pages
- 181-191
- Sources
- bibtex:phds-export.bib