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So the, the point of this picture's that a long-term
bond, the return is riskless over the long horizon, right?
You don't really care about what the short-term
is doing if you're saving it for 10 years.
>> That's exactly right.
A much better way to look at long term bond investments is to take a 10 year
horizon, to look at it as a 10
year horizon, and then it's just a riskless asset.
But we don't, and an interesting feature, you know, when we do this Murtney stuff.
we end up with conditional expected returns for one period equals
conditional covariances with you know, wealth
and conditional covariances with state variables.
What you've just said is something very, very deep.
That in a world where there's time varying information and long horizon investors.
Maybe instead of looking at these things in one period risk
and return, it's much simpler and, and, and a much deeper and
easier way to analyze things, to look over in
fact the investment horizon o, of the actual investor.
Maybe we shouldn't be looking.
That, what you should do is just tear up the envelope because you know
it's a risk-free asset, and don't even get in that argument with your wife.
Yes, I think that's a good and deep point, and actually you,
you just advertised my latest research paper where I'm trying to do this.
And, and we're working on techniques to do that but I think it's a deep
observation that in a non-id world.
Looking at things in instantaneous return space, this is, this is
just a terrible way to think about a long term bond.
You're exactly right. >>
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