A Long Duration
Team Latte
May 25, 2005

In 1938, Frederick Macaulay published his classic book, Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1865. Macaulay focused primarily on the theory of interest rates but as an aside he introduced the concept of "duration" as a more precise alternative to maturity for measuring the life of a bond.

But the investment community was really slow to grasp the concept and give Macaulay credit for this brilliant insight. It was not until the 1970s that professional investors began to substitute duration for maturity in order the estimate the interest rate risk of a fixed income instrument.

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