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CHAPTER%207 - More Yield Curve Stock Market Stock Price The...

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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence The Yield Curve September 2007
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence The Yield Curve September 2007 Until recently, the yield curve was flat/inverted/U-shaped. Theory predicts that agents are expecting lower interest rates in the future. Interest rates fall during contractions (see Chapter 6). Is the US heading for a recession? The yield curve inverted eight times during the past half century, and the U.S. economy ended up in recession seven times.
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence The Yield Curve September 2007 Last year, many economists did not think US was approaching a recession. Medium and long term interest rates have declined around the world because of globalization.
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence The Yield Curve September 2007
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence A Bond Yield Conundrum? Bond markets are increasingly affected by global factors. The global savings glut shifts long term bond demand to the right in developed countries. 1. High oil prices 2. Income growth in high-saving East Asia 3. Excess Reserves of East Asian Central Banks 4. Reduced fiscal deficits in Latin America Global integration of financial markets channels developing countries’ savings to developed countries bond markets.
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence Monetary Policy Implications A country’s interest rates (in particular, the medium- to long-term maturities) will be determined more by global influences and less by domestic factors Central banks ability to affect long-term rates may be diminishing. Globalization calls for greater cooperation and coordination of policy worldwide.
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence CHAPTER 7 The Stock Market
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence So far we have looked at loans and debt securities, which are fixed income securities. Short run debt instruments ( < 1 year) are traded in the money market . e.g. T-bills, commercial paper, certificates of deposit, federal funds Long run debt instruments ( > 1 year) are traded in the capital market . e.g. T-notes and T-bonds, municipal bonds, corporate bonds, commercial loans, mortgages, consumer loans The other major component of the capital market is equity capital .
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More Yield Curve Stock Market Stock Price The Market Price Expectations Efficient Market Hypothesis Evidence Aggregate US Household Portfolio Allocation equities, 33.00%
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