References viii ix vii With the publication of Time Divenification Revisited, Bill Reichenstein and Dovalee Dorsett broaden the scope of time-diversification theory and contribute to its practical utility. Discussion in the literature has centered on the role of history, past and future, in the financial markets: Are they governed by chance, as the random walk devotees contend? Or are they mean reverting, in which case portfolios diversified by investment horizon make sense? The authors of Time Divenification Revisited contend that these two views of market behavior cannot be distinguished statistically, although they do produce daerent projections of ending wealth and shortfall risk. Accordingly, Reichenstein and Dorsett attack the problem pragmatically by examining corresponding sets of future returns under each assumption. Moreover, the portfolios they follow, rather than being full of stocks or bonds or cash, include a mixture of these assets allocated in the same proportions that actual investors choose, given their own risk preferences and lie-cycle stages. Investment practitioners will find most useful the two sets of graphic depictions of ending real wealth and shortfall risk for portfolios of various compositions. The asset allocations of these portfolios are similar to what an investment advisor might prescribe for individual or pension fund clients. With these exhibits, an advisor-whether of the random walk or the meanreversion persuasion-can illustrate for his or her clients the consequences of several conventional asset allocation choices over several investment horizons. A l l in all, we believe this monograph is an eminently useful tool for practitioners. It will expand their own understanding of time diversification and enhance their ability to translate this knowledge for their clients. The Research Foundation is pleased to present this work.
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