That is relevant to certain investors — say, investment banks — whose viability can be threatened by
declines in asset prices and which might be forced to sell securities during depressed markets.
Behavioral finance experts would say that the
increase in asset prices can feed on investor optimism even if it's not fully supported by fundamentals.
Price volatility can cause rapid and significant
swings in asset prices, and sometimes longer - term trends develop that can continue for weeks, months or even years.
«Paper» gains (or losses) due to
changes in asset prices are not «realized» until the fund sells the asset in question.
The latest change in tone may also reflect an additional concern - that low interest rates are fostering financial instability by promoting
bubbles in asset prices and stimulating excessive credit creation.
Investors should therefore expect significant volatility
in asset prices as valuations are adjusted to reflect the impaired ability of coal companies to maintain historical rates of return.
The correlation in global economic fundamentals is at a new high, reflected in the steadily increasing
correlation in asset price movements.
Without a model that encompasses this long - term approach, investors are unable to assess the complete expectations
embedded in any asset price.
The bottom line of this analysis, however, is that it shows the crucial role that the term structure
plays in asset pricing.
I currently have almost 20 years of basic expenses in cash, mainly because I think we are closer to a major
top in asset prices.
But this does not mean that monetary policy should generally ignore the effects of increases and only respond to observed
declines in asset prices.
One of the more common responses to the fact that inflation is low is the idea that the inflation is
all in asset prices.
In other words, to trace the implications of a big
movement in an asset price, for the banking system and the financial system more generally.
9An example of a sustained
rise in asset prices that was not a bubble is the bull market in U.S. equities that began in the 1950s.
It is created by a
surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior.
«The 2017 stress test shows the UK banking system is resilient to deep simultaneous recessions in the UK and global economies, large
falls in asset prices and a separate stress of misconduct costs,» the BoE said.
-LSB-...] skyrockets — CNN / Money The 35 - year
boom in asset prices is coming to an end — Telegraph What Returns Can Investors Expect in Long - Term Treasuries?
This credit availability has further fueled the rampant
inflation in asset prices — specifically stocks, bonds and housing, the price of which now exceeds the levels seen in 2008 right before the great financial crisis.
Value: Cable Car seeks investment opportunities
in assets priced below intrinsic value, irrespective of whether or not they have a low multiple.
Now, the pundits are worried the big swings
in asset prices of the last few months portend doom.
Research out from CBRE Econometric Advisors shows that the typical risk - free benchmark rate, the 10 year Treasury, does not accurately reflect the cost of capital
risks in asset pricing for commercial real estate.
Any pattern or regularity
in asset prices in the market would immediately be taken advantage of by investors looking to make a profit, leaving behind only random fluctuations in their wake.
Lessons to be Learned We have just lived through a period in which rapid increases
in asset prices led to a serious misallocation of resources and a severe financial crisis.
Because some asset prices may fall more abruptly than they rise, and because the effects of downward
moves in asset prices on demand may be larger due to the greater negative impact of deflation on the net worth of borrowers — witness the United States in the 1930s or Japan in the 1990s, the case for adjusting monetary policy in response to negative asset price shocks is commonly considered more compelling than in the alternative context.
That this stance has been expansionary is clear not only from the levels of nominal and real interest rates, which for borrowers have been below the lows reached in the early 1990s, but also in the pace of credit growth, the run - up in household debt, and the
appreciation in some asset prices.
We can't be certain because the role of the central banks has certainly created an investment environment where markets suffer from a lack of RISK
PREMIA in all asset prices.
However, it added that «participants indicated that they did not see the changes
in asset prices during the inter-meeting period as bearing significantly on their policy choice except insofar as they affected the outlook for achieving the Committee's macroeconomic objectives and the risks associated with that outlook.»
Foreigners provided a large portion of the capital that fueled the
runup in asset prices, so they will undoubtedly bear a good portion of the subsequent losses through dollar depreciation and writeoffs in the value of their U.S. financial assets.
The global central banks, which had «underwritten» the 9 year
rally in asset prices, were in the process of «changing their ways.»
Yet ignoring
bearishness in asset prices around the world is particularly near - sighted, if for no other reason that global economic weakness is the biggest threat to the worldwide profits and the worldwide revenue of large U.S. - based corporations.
In one sense, if you wait too long, the opportunity cost of cash could be significant, but over most 5 - year periods there is a
drawdown in asset prices that avail good opportunities.
When shit hit the ceiling, their so - called diversified portfolios were slaughtered by the carnage that took
place in asset prices across geographies and asset classes.
Whereas the industry continues to debate the efficacy of Shiller P / E reversion, we at Research Affiliates firmly believe in mean
reversion in asset prices (Brightman, Masturzo, and Treussard, 2014), although we acknowledge it to be tricky to accurately forecast.