PT - JOURNAL ARTICLE AU - R. Douglas Van Eaton AU - James A. Conover TI - Stock and Bond Sharpe Ratios and Long-Horizon Asset Allocation AID - 10.3905/joi.2001.319449 DP - 2001 Feb 28 TA - The Journal of Investing PG - 35--42 VI - 10 IP - 1 4099 - https://pm-research.com/content/10/1/35.short 4100 - https://pm-research.com/content/10/1/35.full AB - The authors examine the use of Sharpe ratio rankings to draw inferences about asset allocation, especially asset allocation for investors with relatively long investment horizons. First, they demonstrate that Sharpe ratio rankings of stocks and bonds, as they are usually calculated, can be misleading when longer investment horizons are considered. Second, the authors show that since investors face limitations on portfolio leverage and margin terms in practice, using Sharpe ratio rankings as a basis for asset allocation decisions can lead to errors at any horizon. A recent article that uses Sharpe ratio rankings to argue for a large bond component in long-horizon portfolios is used to illustrate both of these potential errors in practical applications and to suggest alternative methods.