tag:blogger.com,1999:blog-582368152716771238.post402817346331275627..comments2024-03-29T05:46:24.412-05:00Comments on The Grumpy Economist: Predictability and correlationJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-582368152716771238.post-87177394165355949002017-12-05T03:52:57.448-06:002017-12-05T03:52:57.448-06:00Hello,
I have a quick question. You say in "...Hello,<br /><br />I have a quick question. You say in " Discount Rates" that there is predictability in the long run. So let's say we can predict 5 years ahead but we can not predict 1 years from now. So why don't we run a regression that predicts 5 year returns, but run this regression 4 years ago. Would that be significant to predict 1 year excess returns ?<br /><br />Thanks for your time Anonymoushttps://www.blogger.com/profile/16863901819156494208noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47969213188964272382015-04-24T14:03:47.241-05:002015-04-24T14:03:47.241-05:00Frank, we know.Frank, we know.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-73926400942165290532014-02-05T15:27:04.669-06:002014-02-05T15:27:04.669-06:00Anonymous,
But the investment horizon is not a pr...Anonymous,<br /><br />But the investment horizon is not a property of the stock itself. That was the point I was making. It is a property of the investor group (investors with long term horizons versus investors with short term horizons). The safety comes from being with the majority group. If only one person was a long term stock investor and every other person was a short term stock investor, then investing in stocks for the long term is not safe.<br /><br />Other asset classes have an investment horizon built into the asset class itself (for instance bonds).<br /><br />So when someone says that "stocks are safer in the long run" what they should really say is that investing in stocks for the long term is safer than investing in stocks for the short term. The stocks themselves are not safer, the investment style is safer.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-24684921511366800982014-02-05T09:51:45.240-06:002014-02-05T09:51:45.240-06:00Frank, the point IS the investment horizon...are s...Frank, the point IS the investment horizon...are stocks safer for people that invest over 20 years or over 1 year horizons. Are you more likely to lose money if you invest for just 1 year in the stock market or 20 years in the same market.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35980488833965717192014-02-04T09:26:34.140-06:002014-02-04T09:26:34.140-06:00All assuming, of course, that volatility is the co...All assuming, of course, that volatility is the correct proxy for risk.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-30071856643450342592014-02-03T08:27:22.881-06:002014-02-03T08:27:22.881-06:00Could you say something about how does your calcul...Could you say something about how does your calculations compare to the results of The Term Structure of the Risk: Return Trade-Off by John Y. Campbell and Luis M. Viceira (2005). It seems to me that in their case the coefficients do not cancel out each other and stocks have lower variance over long term (the term structure) and hence the stocks seems to be safer in long run. Is it a disagreement on the value of coefficients or am I missing something more fundamental?Mukulhttps://www.blogger.com/profile/02604946548478014583noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-11857459992396579252014-02-03T04:47:32.259-06:002014-02-03T04:47:32.259-06:00But if stocks follow a random walk/noise in the sh...But if stocks follow a random walk/noise in the short term yet follow 'logic'/discount cash flows in the longer term, you COULD say that LT investing is 'safer' (as in 'less random') than ST trading.<br /><br />Remember 'the market behaves as a voting machine in the short term and acts as a weighting machine in the long term'?Anonymoushttps://www.blogger.com/profile/02635749385748660522noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-5925913364213183252014-02-02T21:17:14.911-06:002014-02-02T21:17:14.911-06:00There is no such thing as a long run stock versus ...There is no such thing as a long run stock versus a short run stock. Can't say the same thing with options, bonds, and other securities that are time sensitive. <br /><br />And so any "safety" derived from investing in stocks long term versus short term depends in part on what the investment time horizon of stock investors is.<br /><br />Contrast that with bonds. I can buy a 5 year bond and someone else can buy a 30 year bond. If I sell my 5 year bond, it will have no influence on the price of the 30 year bond bought by that other person. Bonds have time sensitive market segmentation built in.<br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-19014006017454071122014-02-02T16:08:45.058-06:002014-02-02T16:08:45.058-06:00Stocks in the short run. Are risks lower for peopl...Stocks in the short run. Are risks lower for people who can invest for a longer time. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-88316378167286333512014-02-02T15:52:34.532-06:002014-02-02T15:52:34.532-06:00"Does the predictability of stock returns fro..."Does the predictability of stock returns from variables such as the dividend yield imply that stocks are safer in the long run?"<br /><br />Safer than what?FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.com