zlacker

It seems to me that short-term simulations will tend to underprice risk.

Imagine a market where you can buy only two stocks:

Stock A goes up invariably 1% per month

Stock B goes up 1.5% per month with a 99% chance, but loses 99% of its value with a 1% chance.

Stock B has a 94% chance of beating stock A on a 6 month simulation, but only a 30% chance of beating stock A on a 10 year simulation.