PT  - JOURNAL ARTICLE
AU  - Sunder R. Ramkumar
TI  - Time Horizon, Risk, and Implications for Equity Selection
AID  - 10.3905/jpm.2020.1.159
DP  - 2020 Jun 30
TA  - The Journal of Portfolio Management
PG  - 118--130
VI  - 46
IP  - 7
4099  - https://pm-research.com/content/46/7/118.short
4100  - https://pm-research.com/content/46/7/118.full
AB  - The author examines over 50 years of equity returns and finds distinct risk characteristics across different time horizons. Defensive, lower beta equities have had smaller monthly losses than their beta would suggest, making them attractive for conservative investors with shorter holding periods. In contrast, the volatility of cyclical, higher beta companies has been increasingly favorable over longer holding periods, bolstering risk-adjusted returns for long-horizon growth investors. This suggests that investors who align the mix of defensive and cyclical stocks to their goals and investment horizon can mitigate risks more effectively than those who simply hold the broad market and add bonds.TOPICS: Fundamental equity analysis, accounting and ratio analysis, technical analysisKey Findings• Defensive, lower beta equities have had smaller monthly losses than their beta would suggest, making them attractive for conservative investors with shorter holding periods. • The volatility of cyclical, higher beta companies has been increasingly favorable over longer holding periods, bolstering risk-adjusted returns for long-horizon growth investors.• Investors who align the mix of defensive and cyclical stocks to their goals and investment horizon can mitigate risks more effectively than those who simply hold the broad market and add bonds.