Tag Info

New answers tagged

1

In this context, I believe carry refers to the sum of "pure" carry + roll down. Carry, in the most general sense, is the return of a position in a static world; i.e., assuming time is the only variable that is changing, what's your holding period return on a trade? When you buy a bond, the "total carry" is the sum of 1) "Pure" carry – you get interest ...


0

"I think we need to find the proportion of bond D that will make the overall duration 0" ... by doing so, you will be matching the duration of bond D, because it has the shortest one. In order to immunize portfolio, you should have some benchmark duration you want to match. If it is the one of bond D, than your suggestion is right. If I am wrong, please, ...


0

Do you mean by cross sectional volatility that you take results from the returns of several assets? Of course then volatility is different since you are averaging across returns. For one asset, it is more useful to calculate volatility over time.


2

Actually, the historical returns, going back to the 1920s, took place in two different ways over two distinct time periods; 1980-present, and 1925-80. This is a more important premise than the fact that stocks have an average total return of 10 percent over the past 80-odd years, and bonds have an average total return of only 5 percent a year over that time. ...


5

Short answer It's complicated. A satisfactory solution is not known. Long answer A satisfactory solution is not known and research is ongoing. That doesn't mean there is nothing interesting to say about it. The phrasing in the question is not entirely correct: First off all, there's is no risk free arbitrage between bonds and stocks. Both are risky and ...


0

Equity risk premium, in theory, should not be zero, given the relative risk profiles of equities and bonds. The equity risk premium puzzle refers to how difficult it is to explain the magnitude of historical equity risk premium using standard economic models. I recommend that you take a look at chapter 2 of this document (written by Antii Ilmanen); it ...


1

The Equity Premium Puzzle is not that Equities have higher returns than Bonds. Bonds always have lower required return than Equity, because they present promised cashflows with senior claims over equity shareholders. The Equity Premium Puzzle is, that Equities have abnormally higher returns than Government Bonds, which means real investors require a higher ...



Top 50 recent answers are included