Excerpt
Excerpt
Developments in Asset Allocation Modeling. Luis Viceira, 2006, Book Chapter, "The "traditional" approach to designing policy portfolios assumes that expected returns risk, and real interest rates do not change over time so that short-term and long-term risk properties of asset returns are the same. Thus, target asset allocations are the same regardless of investment horizon and remain constant over time. The "modern" approach, in contrast, recognizes that expected returns ask, and real interest rates may change over time. This hew creates a wedge between the chart term and long-term risk properties of asset returns and implies that... " Link