This is the third and final report in the duration series, following “Mind your duration” and “Pavlov’s stocks.” As this report will focus on the relative opportunities in the stock market, an old proverb comes to mind which captures the essence of the duration question: “A bird in the hand is worth two in the bush.”
The proverb conveys that what is guaranteed or highly likely to occur, such as having a bird in your hand, is preferable to the possibility of more under conditions of uncertainty, such as the possibility of two birds in the bush. This commonsense proverb is directly applicable to the construct of “duration risk” for viewing risk/reward asymmetries across today’s markets.
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