ABSTRACT
This paper identifies a specific time-risk relationship using a measure of time known as duration and develops some important implications of the relationship. The beta coefficient is the most widely recognized measure of the risk of an asset. An expression for common stock duration can be incorporated into the risk measure of the linear market model in a manner similar to that developed for bonds. A more general risk measure must therefore incorporate the relationships between each component of stock price volatility and the market return. Duration can be computed at any point in time, correlation coefficients and standard deviation can be approximated for short time intervals with daily or weekly data. Any investment which provides cash payments before maturity necessarily has duration less than maturity. Duration is a constant of proportionality relating percentage bond price changes to changes in yield.
