Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10475048 | Journal of Economics and Business | 2005 | 15 Pages |
Abstract
Who should buy long-term bonds? Conventional wisdom holds that bonds are appropriate for “conservative” investors and equities for more “aggressive” investors, a statement which previous research has interpreted exclusively in terms of risk aversion. Assuming only complete markets, investors demand long-term bonds whenever their preferences are such that they will not allow their standard of living to fall below a certain threshold. In particular, we show that investors whose preferences exhibit habit formation hold portfolios that always include long-term bonds.
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Authors
David Weinbaum,