The Time Contradiction (in Asset Management and Asset Pricing) Between Investor Decision Horizons and Time Needed to Establish Skill

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This analysis suggests that the time window to have high confidence in the efficacy of the approach utilized by most investors is much greater than the typical horizon of these approaches – this is the time contradiction in investments. Alternatively, for a given investment horizon, this methodology suggests the degree of confidence an investor might have in their investment inputs and allocation decisions.Living in a volatile world implies that this confidence is low for short time windows. This time contradiction between required time horizon and that used by investors has interesting implications not only for the investment models and approaches used, including various asset pricing models, but also for how investors are compared to
peers and compensated.

Arun Muralidhar, Ph.D.

This analysis suggests that the time window to have high confidence in the efficacy of the approach utilized by most investors is much greater than the typical horizon of these approaches – this is the time contradiction in investments. Alternatively, for a given investment horizon, this methodology suggests the degree of confidence an investor might have in their investment inputs and allocation decisions.Living in a volatile world implies that this confidence is low for short time windows. This time contradiction between required time horizon and that used by investors has interesting implications not only for the investment models and approaches used, including various asset pricing models, but also for how investors are compared to
peers and compensated.

Arun Muralidhar, Ph.D.

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