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Hello sir,
isnt it true that returns increase when time horizon increases?I saw from the technical article of myopic management the following:
‘..when the internal rate of return (IRR) metric is used, the return naturally goes up as the time horizon comes down. So, when companies plan investments and keep score according to efficiency measures, they inevitably invite investment decisions; where uncertain, empowering innovations requiring long lead times for development are sacrificed for more certain, efficiency innovations requiring much shorter time horizons for profitable results.’ (3)Does return increase or decrease as time horizon increase? Please help me sir Im confused.
Thanking you in advance.
Best regards,
Rojid Nayaz.The statement is not saying that returns themselves increase, but that the IRR will increase if the time horizon is shorter.
However you could never possibly be expected to write that statement in the exam – the article is not written by the examining team and I would not worry about it 🙂
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