Fallacy of the Log-Normal Approximation to Optimal Portfolio Decision-Making Over Many Periods (Classic Reprint) - Hardcover

Robert C. Merton

Hardcover

ISBN 10: 0266633854 ISBN 13: 9780266633853

Publisher: Forgotten Books, 2017

Synopsis

Debunking a popular shortcut in long-term investing

This book exposes how a widely used log-normal shortcut can mislead portfolio choices when time horizons stretch across many periods.

It guides readers through the limits of common approximations, showing where they fail and why more careful analysis matters. You’ll see concrete examples, clear explanations, and practical warnings about relying on simple surrogates when planning for the long haul.

• Learn why maximizing the expected log of wealth does not always match the best long‑term strategy
• See how substituting a log-normal distribution for actual returns can derail optimal decisions
• Understand the role of time subdivision and how it affects decision rules and risk assessment
• Explore alternative efficiency frontiers beyond mean-variance and their implications for risk tolerance

Ideal for readers of advanced portfolio theory, financial mathematics, and those seeking a rigorous check on popular heuristics used in long‑term investing.

About this title

About the Author

Robert C. Merton is George Fisher Baker, Professor of Business Administration, Harvard University.

Edition details

• Publisher: Forgotten Books
• Publication date: 2017
• Language: English
• ISBN 10: 0266633854
• ISBN 13: 9780266633853
• Binding: Hardcover
• Number of pages: 101