What does a longer duration imply about an investment's price volatility?

A longer duration indicates higher price volatility for an investment, particularly in the context of fixed-income securities or bonds. Duration measures how sensitive the price of a financial asset is to changes in interest rates. When the duration of an investment extends, it means that the investment is expected to maintain its cash flows over a longer period.

In situations where interest rates rise, prices of long-duration investments tend to decrease more significantly compared to those with shorter durations. This is because investors require a higher return for locking their capital away for an extended time, which leads to larger fluctuations in value. Therefore, a longer duration signifies that small changes in interest rates can lead to relatively large changes in the asset's price, resulting in higher price volatility.

Understanding this risk associated with duration is crucial for investors aiming to manage their exposure to interest rate movements within their portfolios.