When short-term returns are serially uncorrelated, expected long-term and short-term returns are equal. However, we show that negative serial correlation among the short-term returns make the expected long-term returns lower than the short-term ones. Such serial correlation is likely to arise,...

For many endowment funds and sovereign wealth funds draws tend to be tied to the expected financial returns. As shown by Dybvig and Qin, such a rule will eventually deplete the fund even if its value is preserved in expectation. We add to their results by finding that, if the financial returns...