Investment horizon

From ACT Wiki
Jump to navigationJump to search


The investment horizon is the length of time for which an investor plans to hold an investment.

Depending on their different investment horizons, different investors may regard the same investment asset as having different levels of risk in the context of their differing investment strategies.

Term premia: models and some stylised facts
"... long-term interest rates can be broken out into a part that reflects the expected path of short-term interest rates and a term premium.
... the latter part represents the compensation, or risk premium, that risk-averse investors demand for holding long-term bonds.
This compensation arises because the return earned over the short term from holding a long-term bond is risky, whereas it is certain in the short term for a bond that matures over the same short investment horizon.
While some types of investor, such as pension funds, may consider long-term bonds less risky given their long-term liabilities, most other investors would tend to view them as more risky."
Bank for International Settlements, Quarterly Review, September 2018.

See also