Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-25T08:00:08.118Z Has data issue: false hasContentIssue false
  • English
  • Français

Duration and Security Risk

Published online by Cambridge University Press:  06 April 2009

Ronald Lanstein  and
William F. Sharpe
Get access Rights & Permissions [Opens in a new window]

Extract

Estimation and control of security risk are subjects of major theoretical and practical importance. Much of the literature in this area has focused on the risk associated with returns over a single holding period. Within this context, a great deal of attention has been devoted to estimation of security betas, which relate to coveriance with “the market,” since the well-known Capital Asset Pricing Model implies that expected returns will, in equilibrium, be related to such values. However, a number of papers [3, 7, 14] have considered “extra-market covariances,” i.e., covariances among security returns not due to common correlations with the market as a whole. Accurate estimates of such covariances are necessary for tailoring portfolios to account for differences in investors' circumstances (e.g., tax brackets) and, a fortiori, for active portfolio management designed to exploit any security mispricing.

Type
III. Duration and Portfolio Strategy
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 4 , November 1978 , pp. 653 - 668
Copyright
Copyright © School of Business Administration, University of Washington 1978

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Bierwag, G. O.; Kaufman, George G.; and Khang, Chulsoon. “Immunization Strategies and the Implications.” The Center for Capital Market Research, University of Oregon (1978).Google Scholar
[2]Boquist, John A.; Racette, George A.; and Schlarbaum, Gary G.. “Duration and Risk Assessment for Bonds and Common Stocks.” Journal of Finance (12 1975).CrossRefGoogle Scholar
[3]Farrell, James L. Jr, “Analyzing Covariation of Returns to Determine Homogeneous Stock Groupings.” Journal of Business (04 1974).Google Scholar
[4]Fisher, Lawrence, and Weil, Roman L.. “Coping with the Risk of Interest Rate Fluctuations: Returns to Bondholders from Naive and Optimal Strategies.” Journal of Business (10 1971).Google Scholar
[5]Goodman, Laurie, and Sharpe, William F.. “Perspective on Bank Capital Adequacy; A Time Series Analysis.” Working Paper, No. 247, National Bureau of Economic Research (05 1978).CrossRefGoogle Scholar
[6]Ingersoll, Jonathan E. Jr,; Skelton, Jeffrey; and Weil, Roman L.. “Duration Forty Years Later.” Graduate School of Business, University of Chicago (04 1978).CrossRefGoogle Scholar
[7]King, Benjamin F. “Market and Industry Factors in Stock Price Behavior.” The Journal of Business (01 1966).Google Scholar
[8]Klemkosky, Robert C., and Martin, John D.. “The Effect of Market Risk on Portfolio Diversification.” Journal of Finance (03 1975).Google Scholar
[9]Kaufman, George. “Duration, Planning Period, and Tests of the Capital Asset Pricing Model.” Paper presented at the Eastern Finance Association Meeting (04 1978).Google Scholar
[10]Livingston, Miles. “Duration and Risk Assessment for Bonds and Common Stocks: A Note.” Journal of Finance (03 1978).Google Scholar
[11]MacAulay, F. R.Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields, and Stock Prices in the U.S. since 1856. New York: National Bureau of Economic Research (1938).Google Scholar
[12]Oldfield, George S. Jr, and Bower, Richard S.. “Returns on Government Securities.” Unpublished Manuscript (08 1976).Google Scholar
[13]Oldfield, George S. Jr, “The Behavior of Default Free Spot Discount Rates.” Paper presented at the Institute for Quantitative Research in Finance (04 1978).Google Scholar
[14]Rosenberg, Barr, and Marathe, Vinay. “Common Factors in Security Returns: Microeconomic Determinants and Macroeconomic Correlates.” University of California Berkeley Research Program in Finance Working Paper No. 44 (05 1976).Google Scholar
[15]Sharpe, William F.Investments. Englewood Cliffs, N.J.: Prentice-Hall (1978).Google Scholar
[16]Wells Fargo Investment Advisors. Security Market Line Report.Google Scholar