Macaulay duration
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
The weighted-average time to a bond's cash flows, with weights equal to the present-value fractions of price.
Macaulay duration in plain English
A bond pays you money at different times: small interest payments along the way, then a big chunk at the end. Macaulay duration answers the question 'on average, how many years until I actually get my money back?', but it is a smart average that weights each payment by how much it is worth today, so bigger and sooner payments count more. Picture a row of paychecks arriving over several years; duration is the balancing point of that timeline, tilted toward whichever payments carry the most present-day value. It matters because a longer duration means the bond's price swings more when interest rates move.
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