This paper decomposes portfolio returns into the underlying sources arising from the constituent stocks' growth rates, as well as their variances and covariances. We employ this method to show that the difference between large and small stock portfolio returns is driven by a portfolio “excess...

We use stochastic dominance to test whether investors should prefer riskier securities as the investment horizon lengthens. Simulated return distributions for stocks, bonds, and U.S. Treasury bills are generated for holding periods of one to 20 years and stochastic dominance tests are run to...