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Prof. Lubos Pastor: Equilibrium Models vs. Intuition (EP.124)

The Rational Reminder Podcast

CHAPTER

Challenging Conventional Wisdom on Stock Volatility and Long-Horizon Investing

This chapter challenges the belief that stocks are less volatile over longer investment horizons by emphasizing the importance of forward-looking measures of volatility. It discusses the impact of uncertainty about parameter estimates on volatility for long-horizon investors and its influence on asset allocation decisions, including the use of target date funds. The chapter also explores the relationship between skill and performance in active fund management and the shift in the active management industry towards passive investing.

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