RT Journal Article
SR Electronic
T1 Should the Interest Rate Level Influence Asset Allocation?
JF The Journal of Investing
FD Institutional Investor Journals
SP joi.2018.1.069
DO 10.3905/joi.2018.1.069
A1 Gerald Garvey
A1 Konark Saxena
YR 2018
UL https://pm-research.com/content/early/2018/05/09/joi.2018.1.069.abstract
AB How does the interest rate environment inform the allocation between risky and safe assets? The authors focus on the level rather than change in rates because rates are highly persistent; changes are infrequent and unpredictable while low versus high rate regimes are durable. US history from 1926-2016 shows that equities have lower risk and higher excess returns when rates are low. Despite all the concern about low yield, a low rates environment is actually a good thing for more aggressive investors.