Some time ago, I wrote about the research of Jules van Binsbergen who showed that you can replicate the performance of the S&P 500 with a series of Treasury strips that pay the amount of the expected dividend at maturity.
I don’t really think so. Why invest in bonds that are certain to go down when interest rates rise. By buying equities you at least have a chance of an up market despite higher interest rates.
Van Binsbergen, like Koijen, is unafraid to tackle the core assumptions that many of us have held since our university days. This is another good example - - thanks for bringing it to our attention, Joachim!
Loved the beginning but was a bit surprised by the ending.
Should advice have been:
Construct a bond portfolio to replicate FTSE?
I don’t really think so. Why invest in bonds that are certain to go down when interest rates rise. By buying equities you at least have a chance of an up market despite higher interest rates.
Van Binsbergen, like Koijen, is unafraid to tackle the core assumptions that many of us have held since our university days. This is another good example - - thanks for bringing it to our attention, Joachim!
Any views on the Australian market in the context of this research?
Sorry, no, because I know so little about that market that I can’t form an opinion.