Portfolios for long-term investors
Jan 13 2022. Review of Finance, 26(1), 1-42 (2022). This is an essay on portfolio theory and practice, which evolved from a keynote talk at the NBER conference, ``New Developments in Long-Term Asset Management” Jan 21 2021. Portfolio practice looks almost nothing like portfolio theory. I offer two ideas: look at the stream of payouts or dividends directly, and ask what the function of asset markets is, and what your role in them is. The average investor holds the market portfolio. How are you different? A lot of fascinating asset pricing hasn’t yet made its way into portfolio theory, and I think about how to do that. Complete the model, and add interesting heterogeneity.
Read the paper (free access link to published version)
doi link. Last Manuscript (but the free access link should work)