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Are stocks riskier than bonds? Not if you assess risk like Warren Buffett

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  • Javier Estrada

    (IESE Business School)

Abstract

Academics, practitioners and investors essentially agree that in the short term stocks are riskier than bonds. Which of these two assets is riskier in the long term, however, is controversial. This short article explores this issue by assessing long-term risk as suggested by Warren Buffett; that is, with the probability of losing purchasing power. If risk is viewed this way, a comprehensive data set spanning over 19 countries and 110 years clearly suggests that in the long term stocks are less risky than bonds.

Suggested Citation

  • Javier Estrada, 2013. "Are stocks riskier than bonds? Not if you assess risk like Warren Buffett," Journal of Asset Management, Palgrave Macmillan, vol. 14(2), pages 73-78, April.
    • Handle: RePEc:pal:assmgt:v:14:y:2013:i:2:d:10.1057_jam.2013.5
    DOI: 10.1057/jam.2013.5
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    References listed on IDEAS

    as
    1. Javier Estrada, 2006. "Downside Risk in Practice," Journal of Applied Corporate Finance, Morgan Stanley, vol. 18(1), pages 117-125, March.
    2. Delong J. Bradford, 2008. "Stocks for the Long Run," The Economists' Voice, De Gruyter, vol. 5(7), pages 1-2, November.
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    Cited by:

    1. Javier Estrada, 2014. "Rethinking risk," Journal of Asset Management, Palgrave Macmillan, vol. 15(4), pages 239-259, August.

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