This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Review: Vol. 91 No. 1 (March 2001)
AER Volume. 91, Issue 1 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter
AER Forthcoming Articles
Full-text Article
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter
Explore:
AER Forthcoming Articles
Who Should Buy Long-Term Bonds?
Article Citation
Campbell, John Y., and
LuisM. Viceira. 2001. "Who Should Buy Long-Term Bonds?."
American Economic Review,
91(1): 99-127.
DOI: 10.1257/aer.91.1.99
DOI: 10.1257/aer.91.1.99
Abstract
According to conventional wisdom, long-term bonds are appropriate for conservative long-term investors. This paper develops a model of optimal consumption and portfolio choice for infinite-lived investors with recursive utility who face stochastic interest rates, solves the model using an approximate analytical method, and evaluates conventional wisdom. As risk aversion increases, the myopic component of risky asset demand disappears but the intertemporal hedging component does not. Conservative investors hold assets to hedge the risk that real interest rates will decline. Long-term inflation-indexed bonds are most suitable for this purpose, but nominal bonds may also be used if inflation risk is low.
Article Full-Text Access
Full-text Article
Authors
Campbell, John Y. (Harvard U and NBER)
Viceira, LuisM. (Harvard U, NBER, and CEPR)
Viceira, LuisM. (Harvard U, NBER, and CEPR)
JEL Classifications
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
G11: Portfolio Choice; Investment Decisions
G11: Portfolio Choice; Investment Decisions
