Risky Asset Holdings and the Investment Horizon: Empirical Findings

Abstract

The paper econometricallyestimate investors‘ optimal portfolios are independent of their investmenthorizon. When ex ante diversification is investigated there appears to be no evidence of increased demand for equity over a longer investment horizons in India. That is, in India we obtain a flat equity profile over the investment horizons.Therefore, the mean-aversion in fixed-income explains the time diversification effect. The results also indicatethat cross- correlation amongst asset returns do not seem to playany role in time diversification either.