Volume 15, Number 4, 2017
We re-examine the literatures’ disparate conclusions that stock returns are more (less) volatile over longer investment horizons. We claim that the commonly employed variance ratio is incapable of generally determining whether investment risk increases with investment horizon. We demonstrate that the use of effective returns and standard deviation ratios have significantly different results compared to continuous return variance ratios. Using basic return generating processes and standard deviations, plus a recent well-specified study, we find stocks are less volatile over short to long horizons but are more volatile over very long horizons. The conclusions are consistent with some research for very long horizons but inconsistent in short to long horizons.