Expected returns, variances, betas, and alphas are all non-linear functions of the investment horizon. This seems to be a fatal conceptual problem for the capital asset pricing model (CAPM), which assumes a unique common horizon for all investors. We show that under the standard assumptions, the...

Many investors and institutions have a long-run investment perspective, hence the question of stocks versus bonds in the long-run is of central importance. Despite the great deal of research attention devoted to this issue, views remain conflicting. Indeed, neither stocks nor bonds dominate when...

Modigliani and Miller's Proposition III asserts that if a firm's projects are all similar, they should all be discounted at the same marginal cost of capital (MCC), which is also the firm's average cost of capital (ACC). However, when a firm expands by accepting a new project, its weight in...