The fallacy of large numbers revisited: The construction of a utility function that leads to the acceptance of two games, while one is rejected

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Should the composition of an investment portfolio differ depending on whether the investment horizon is longer or shorter? Practitioners have always allocated more risky investments to portfolios with longer investment horizons. But in 1963, P. A. Samuelson put forward strong arguments that this is an erroneous approach. Since then, the financial community has lived with this conflict and searched for plausible explanations. In this paper, however, we construct a counterexample to the thesis of 1963.Journal of Asset Management (2001) 1, 257–266; doi:10.1057/palgrave.jam.2240020

Document Type: Research Article


Affiliations: 1: 1Fortis Investment Management, Boulevard Roi Albert II, 1, 1210, Brussels, Belgium., Tel: +32 2274 8487, Fax: +32 2274 8206, Email: 2: 2Chief Economist of Fortis Bank, Professor at the Free University of Brussels, and Member of the Executive Committee of Association Belge des OPC

Publication date: January 1, 2001

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