Learn what Macaulay duration measures, how the formula works, and why it is foundational for fixed-income interest-rate analysis.
Macaulay duration measures the weighted average time it takes for an investor to receive a bond’s cash flows.
It is one of the core fixed-income tools used to think about timing, present value, and interest-rate sensitivity.
The metric weights each coupon and principal payment by both timing and present value. In simplified form:
A longer duration generally means the bond’s value is more exposed to rate changes because more of its economic value arrives later.
Macaulay duration matters because it underpins duration-based bond risk analysis and portfolio immunization. It also provides the foundation for modified duration, which translates timing into approximate price sensitivity.