In a recent article in this journal, Zvi Bodie used a simplified Black–Scholes model to prove that the cost of insuring a long-term stock portfolio against earning less than the risk-free rate increases over time. Bodie believes that this means the risk of investing in common stocks increases over time and that the conventional wisdom of the investment community concerning time diversification is a fallacy. Bodie's proof relies on a constant standard deviation for common stock over all holding periods. This assumption, however, may not be appropriate for long-term stock portfolios.

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