Post by ehsanulh125 on Jan 9, 2024 0:49:42 GMT -6
Today, it is a widely known fact about the functioning of the economy that the expectations of economic actors have an impact on certain economic processes. Inflation is perhaps an example of this that is organically integrated into the public consciousness. Inflationary expectations can significantly influence the rate of inflation, since, if economic actors expect prices to rise, they can accordingly demand higher wages, which can cause another price increase through increased costs and demand. However, expectations can affect not only the development of the general price level, but also the prices of other assets, such as stocks. If investors expect the stock market to rise, they buy stocks, which increases their price.
However, less is said about the fact that Buy Bulk SMS Service not only expectations can influence asset prices, but also vice versa, asset prices influence expectations. Of course, this is not surprising either, since economic actors form their expectations regarding the given asset price using the information obtained from the asset price itself. Incorporating this circular process into economic models is a less self-evident task. Economic models assuming rational expectations, which dominated economic theory for a long time, cannot describe the above process well. Economic actors in such models use all available information to form their expectations, which are the same as expectations in the mathematical sense, and in which it is difficult to incorporate the uncertainties that are present to a large extent in real life. Financial models based on rational expectations are difficult to explain by themselves the specifics of stock market movements, one of which is a certain degree of predictability of stock returns.
Because investors with rational expectations use all available information to predict stock returns, all of this information is incorporated into stock prices as market participants use it to trade stocks. This leads to current stock prices being equal to the market's best forecast. In other words, stock prices can only be moved by factors that are unknown to anyone, and as a result, these movements cannot be predicted. However, it is a largely accepted fact in the financial literature today that it is possible to predict stock returns to a certain extent, which can be shown primarily in the longer term, 3-5 years. In connection with a large number of macroeconomic and financial indicators, researchers have already proven that they can be used to predict stock returns at some level. These include, for example, the D/P ratio, the long and short government bond spread , and inflation.
However, less is said about the fact that Buy Bulk SMS Service not only expectations can influence asset prices, but also vice versa, asset prices influence expectations. Of course, this is not surprising either, since economic actors form their expectations regarding the given asset price using the information obtained from the asset price itself. Incorporating this circular process into economic models is a less self-evident task. Economic models assuming rational expectations, which dominated economic theory for a long time, cannot describe the above process well. Economic actors in such models use all available information to form their expectations, which are the same as expectations in the mathematical sense, and in which it is difficult to incorporate the uncertainties that are present to a large extent in real life. Financial models based on rational expectations are difficult to explain by themselves the specifics of stock market movements, one of which is a certain degree of predictability of stock returns.
Because investors with rational expectations use all available information to predict stock returns, all of this information is incorporated into stock prices as market participants use it to trade stocks. This leads to current stock prices being equal to the market's best forecast. In other words, stock prices can only be moved by factors that are unknown to anyone, and as a result, these movements cannot be predicted. However, it is a largely accepted fact in the financial literature today that it is possible to predict stock returns to a certain extent, which can be shown primarily in the longer term, 3-5 years. In connection with a large number of macroeconomic and financial indicators, researchers have already proven that they can be used to predict stock returns at some level. These include, for example, the D/P ratio, the long and short government bond spread , and inflation.
