Inker: Equities are longer duration than perpetual bonds due to cash flow growth
Ben Inker · Ben Inker – Value Investing at GMO (First Meeting, EP.17) · Mar 30, 2020 · at 43:18
Ben Inker, Head of Asset Allocation at GMO, explains how interest rate changes and duration mechanics apply to equity valuations.
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“Equities are in principle an exceptionally long duration asset. Relative to bonds, they are both a perpetuity, so there is no maturity date, and that makes them long duration. But also, they're even longer duration than a perpetual bond because their cash flows grow over time, and therefore, cash flows you're going to be getting in 20, 3050 years have some material present value.”
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