Solution to Barnstable and Long-Run Risk

Solution to Barnstable and Long-Run Risk#

HBS Case#

The Risk of Stocks in the Long-Run: The Barnstable College Endowment#

# Output from previous execution
    1965 - 1999 2000 - 2024 1926 - 2024
    mean vol mean vol mean vol
levels SPX 12.94% 14.94% 8.75% 15.28% 11.55% 18.66%
TB1M 6.15% 0.72% 1.75% 0.56% 3.19% 0.85%
excess_returns 6.87% 15.02% 7.01% 15.31% 8.33% 18.73%
logs SPX 11.76% 14.96% 7.56% 15.38% 9.78% 18.59%
TB1M 6.13% 0.71% 1.74% 0.55% 3.18% 0.85%
excess_returns 5.72% 15.12% 5.81% 15.42% 6.57% 18.69% 
# Output from previous execution

SPX underperforming risk-free rate in the 15 years after 1999: 7.16%
SPX underperforming risk-free rate in the 30 years after 1999: 1.92%
../_images/54bb81f34bf60ccdecac2ecada53bd19208d31613d809ad78dcafeac7ed7cbdc.png 
# Output from previous execution

SPX underperforming risk-free rate in the 30 years after 2024: 2.35%

# Output from previous execution

Probability of underperformance in 2000-2024: 8.42%
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