The Desirability Index: A Measure For The Desirability Of Stocks Over Bonds Over The Long Term

Abstract

One of the long held beliefs in the field of investments is that stocks are more desirable as compared to bonds for long horizon portfolios. But how long is the long horizon? This paper defines two summary measuresthe Desirability Index and the Cutoff Horizonto measure the desirability of stocks over bonds, and concludes that, based on historical performance, stocks are more desirable than bonds for horizons longer than 15 years.