Changes in the position of equities in the risk/return trade-off

- "The crisis has led to a fall in share prices and a rise in the variability of their return. We seek to ascertain to what extent this development has made equities less attractive for investors, relative to other assets. To this end, we look at changes in the positioning of equities relative to other assets (sovereign bonds, corporate bonds) in the risk/return trade-off."
- "We see that:
• if investors have a long-term horizon and a long memory (15 years for example), the relative appeal of equities is only barely reduced;
• if investors, however, have a short-term horizon and a short memory (8 years for example), they believe that investment in equities is completely dominated by investment in bonds."

Natixis Flash Economics 401 20100819

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