Persistent noise, investors’ expectations, and market meltdowns

Giovanni Cespa, Xavier Vives, 22 April 2014

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The recent financial crisis has revived interest in the question of what triggers crashes and meltdowns in financial markets. An important reason for abrupt and large price dislocations is the lack or ‘slow motion’ of arbitrage capital (Duffie 2010) that weakens the risk-bearing capacity of liquidity providers.

Topics: Financial markets
Tags: asset prices, financial crises, informational efficiency, liquidity, noise trading

The transmission of Federal Reserve tapering news to emerging financial markets

Joshua Aizenman, Mahir Binici, Michael M Hutchison, 4 April 2014

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The quantitative easing (QE) policies of the US Federal Reserve in the years following the crisis of 2008–2009 included monthly securities purchases of long-term Treasury bonds and mortgage-backed securities totalling $85 billion in 2013. The cumulative outcome of these policies has been an unprecedented increase of the monetary base, mitigating the deflationary pressure of the crisis.

Topics: Exchange rates, International finance, Monetary policy
Tags: asset prices, Credit Default Swaps, emerging markets, exchange rates, Federal Reserve, stock markets, tapering

Capital inflows and booms in asset prices: Going beyond the current account

Eduardo Olaberría, 7 December 2013

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For decades, policymakers’ perception has been that large capital inflows can fuel booms in asset prices. If this were true, bonanzas in capital inflows would imply an important risk to financial stability, since booms in asset prices are leading indicators of financial crises.

Topics: Financial markets, International finance
Tags: asset prices, booms, bubbles, capital flows, Capital inflows, current account

Dark side of housing-price appreciation

Indraneel Chakraborty, Itay Goldstein, Andrew MacKinlay, 25 November 2013

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Policymakers around the world often worry about decreases in real-estate prices and other asset prices, and take measures to prevent them. For example, in the aftermath of the financial crisis, the Federal Reserve has engaged in large-scale asset purchases – especially of mortgage-backed assets – to support the housing market and, in turn, the overall economy.

Topics: Financial markets, Monetary policy
Tags: asset prices, banks, Federal Reserve, housing, investment, lending, real estate

Speculative investors and transaction tax in the housing market

Yuming Fu, Wenlan Qian, Bernard Yeung, 7 November 2013

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The Global Financial Crisis revived the idea of using transaction taxes to discourage short-term speculative trades. Such trading is often blamed for causing excess volatility in financial markets. Tobin (1978) proposed the tax more than 40 years ago, to “throw some sand in the wheels of speculation”, specifically for currency trading.

Topics: Financial markets
Tags: asset prices, financial transaction tax, housing, Singapore, stamp duty

Fama, Hansen, and Shiller: An excellent choice of Nobel laureates

Tarun Ramadorai, 24 October 2013

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The recent announcement of the 2013 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has delighted researchers working in empirical asset pricing.

Topics: Financial markets
Tags: asset prices, methodology, Nobel Prize

The Inefficient Markets Hypothesis: Why Financial Markets Do Not Work Well in the Real World

Roger E. A. Farmer , Carine Nourry, Alain Venditti, 13 January 2013

Vox readers can download Discussion Paper 9283 for free here.

Journalists are entitled to free DP downloads on request; please contact pressoffice@cepr.org. To learn more about subscribing to CEPR's Discussion Paper Series, please visit the CEPR website.

URL: www.cepr.org/pubs/dps/DP9283.asp
Topics: International finance, Macroeconomic policy
Tags: asset prices, efficient markets, excess volatility

Origins and macroeconomic implications of asset bubbles

Alberto Martin, Jaume Ventura, 16 February 2011

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What is a bubble? Today’s economies often experience large movements in asset prices that have significant macroeconomic effects. Given that many of these movements in asset prices seem unrelated to economic conditions or fundamentals, they have come to be called bubbles, whether swelling or bursting.

Topics: Frontiers of economic research, Macroeconomic policy
Tags: asset bubbles, asset prices, rational agents

Disasters, recoveries, and the equity premium

Robert Barro, Emi Nakamura, Jón Steinsson, Jose F. Ursua, 8 July 2010

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Previous research, including Rietz (1988) and Gabaix (2009), suggests that the potential for rare, but large, economic disasters helps to explain the equity-premium and related asset-pricing puzzles. Motivated by these findings, our research described in Barro et al.

Topics: Financial markets, International finance
Tags: asset prices, Economic crises, Equity premium

Keynes and the Crisis

Axel Leijonhufvud, 13 May 2008

URL: http://www.cepr.org/pubs/PolicyInsights/CEPR_Policy_Insight_023.asp
Topics: Financial markets
Tags: asset prices, inflation targeting, monetary policy, subprime crisis

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