Stock Returns and Holding Periods

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Li, Bin
Liu, Benjamin
Bianchi, Robert
Su, Jen Je
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2012
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Abstract

While it is generally accepted that equities achieve higher returns than fixed interest on average over the longer run, recent financial market volatility and poor equity performance have raised questions about the required holding period. Our study addresses this issue by examining US stocks and Treasury bills from 1963 to 2011. We find that a 15-year holding period is required to ensure a 95 per cent probability that stocks will outperform the risk-free rate of return. And, for large market capitalisation stock portfolios (favoured by pension funds) the investment horizon is even longer.

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JASSA

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2012

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2

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© 2012 JASSA and the Authors. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.

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Accounting, auditing and accountability

Banking, finance and investment

Finance

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