I don't believe there's any real way you "supposed" to hold or shoot a bow. There's all sorts of styles.
I hold the bow with my thumb and first 2 fingers. I usually make bendy handle bows for myself, with 2-3" handles, but only slightly narrower than the bow. If the bow is for someone else I make a 4" handle.
I'm sure a 1" handle would work, but you'd need a real awkward thick spot in the belly.