Duration as an Equity Factor

Selecting stocks based on their interest rate-sensitivity

April 2024. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Stocks can have a high, low, or negative sensitivity to interest rates
  • The duration profile of stocks changes frequently
  • Having rates exposure in an equities portfolio is not necessarily a concern


The goal of conducting research is to provide clarity by answering questions or confirming theories, but that is not always achieved. For example, we published two research articles on duration and equities (read Duration of U.S. Equities and Duration of U.S. Equities – II) in 2024, but these led to more questions and left us somewhat perplexed.

In the first article, we learned that sectors and factors were not very sensitive to changes in interest rates on average in the period from 1963 to 2023, but also that the averages are misleading as the sensitivity varied significantly over time. In the second article, we could not validate the popular narrative that technology stocks are “long-duration” assets.

However, our previous analysis focused on sectors rather than individual stocks, which may have impacted the research conclusions, eg some technology stocks feature leverage and pay dividends, so have less value in their terminal value than ones still searching for product-market-fit.

In this article, we will use duration for stock selection to create duration-themed portfolios.


We use the simple approach to define duration as the sensitivity of stocks to the U.S. 10-Year Treasury Yield as measured via a regression analysis. However, we need to differentiate between stocks that are sensitive to interest rates, which may be measured via highly positive or negative betas, and stocks that are not sensitive, where the betas would be close to zero. Given this, we create four portfolios by selecting the top and bottom 10% of the stocks based on their interest rate sensitivity from the universe of all U.S. stocks with a market capitalization of larger than $1 billion:

  1. Low interest rate-sensitive stocks: These stocks have betas