Interest Rate Uncertainty Impacts Bond Investments More Than Stock Volatility
The article presents a solution for investors dealing with uncertainty in changing stock prices, interest rates, and volatility. By analyzing real market data, the researchers show that considering uncertainty together, rather than separately, is crucial. They found that in incomplete markets, bond investments are greatly affected by interest rate uncertainty, while volatility uncertainty doesn't impact portfolios much. Ignoring volatility uncertainty can be costly in complete markets, and neglecting interest rate uncertainty leads to significant losses in both market types.