If prices are as likely to increase as decrease, why do investors earn positive returns from the market on average?

Question

Robert

Business

29 December, 10:47

If prices are as likely to increase as decrease, why do investors earn positive returns from the market on average?

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Answers (1)

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Pablo Burns · Answer 1

Returns are calculated over the long-run

Explanation:

Investors earn profits based on their risk portfolio and every investor who has constructed a portfolio is likely to earn positive returns. If prices are likely to increase as decrease the investors earn positive returns because returns are calculated over the long-run. The chances of positive returns are higher since daily changes are usually small, and they do not affect returns in the long-run.