Macaulay Duration

Macaulay Duration is the weighted average time until a bond's cash flows (coupon payments and principal repayment) are received, measured in years, where each cash flow is weighted by its present value as a proportion of the bond's total price. It was developed by economist Frederick Macaulay in 1938. A bond with a higher Macaulay Duration is more sensitive to interest rate changes—its price will move more for a given shift in yields. For example, a zero coupon bond's Macaulay Duration equals its time to maturity. Portfolio managers use Macaulay Duration to match asset and liability timelines and to assess and manage interest rate risk in fixed-income portfolios.