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,...

Models of habit formation in consumption typically specify utility over the excess of consumption above some habit level. This specification is unsatisfactory in settings where agents occasionally must tolerate consumption below that level. More importantly, their solutions often are infeasible...

We simulate the future performance of the Norwegian Government Pension Fund Global as a leading example of sovereign wealth funds intended both to preserve wealth and provide regular budget contributions. Withdrawals are limited to the fund’s expected real returns; however, deviations are...