Monetary Policy and Investment Opportunities

By Laura S. Nowak | Go to book overview
1950-59 1960-69 1970-79 1980-89
T-Bill Rate/Dividend Yield .59 1.27 1.59 2.11
Int. Bond Yld./Dividend Yield .81 1.49 1.89 2.51
Lon Bond Yld./Dividend Yield .84 1.47 1.94 2.57
Werner F. M. De Bondt, in his 1991 study of smart money, reports that academic, business, and government economists have been unable to predict economic variables successfully or to enjoy any predictive power for investment strategies. Instead, they tend to "overreact" to economic information so that instead of efficient markets that follow a random walk, markets tend to be "mean-reverting."
5.
Spiro, Real Interest Rates, 173.
6.
Stein, Value Investing, 97.
7.
Appendix B of Stein, Value Investing, referred to on p. 97, shows the relevance of this measure over the twenty-year period 1965-85.
8.
Jaffe and Mandelker, "The 'Fisher Effect'"; Bodie, "Common Stocks as a Hedge Against Inflation"; and Feldstein, "Inflation and the Stock Market."

REFERENCES

Bodie Zvi. "Common Stocks as a Hedge Against Inflation." The Journal of Finance 131 ( May 1976):459-69.

DeBont Werner F. M. "What Do Economists Know About the Stock Market?" The Journal of Portfolio Management (Winter 1991):84-91.

Feldstein Martin. "Inflation and the Stock Market." The American Economic Review 70 ( December 1980):839-47.

Ibbotson R. G., R. C. Carr, and A. W. Robinson. "International Equity and Bond Returns." Financial Analysts Journal 38 ( July-August 1982):65, 73.

Ibbotson R. G., L. B. Siegel, and K. S. Love. "World Wealth: Market Values and Returns." The Journal of Portfolio Management 2 (Fall 1985):4-23.

Jaffe Jeffrey F., and Gershon Mandelker. "The 'Fisher Effect' for Risky Assets: An Empirical Investigation." Journal of Finance 131 ( May 1976):447-59.

"Monetary Policy and Open Market Operations during 1990." Federal Reserve Bank of New York Quarterly Review 16 (Spring 1991):52-78.

"Goldman Study of Stocks Rise in 80s Poses a Big Riddle." Wall Street Journal. June 5, 1991.

Spiro Peter S. "The Impact of Interest Rate Changes on Stock Price Volatility." The Journal of Portfolio Management 16 (Winter 1990):63-68.

Spiro Peter. Real Interest Rates and Investment and Borrowing Strategy. New York: Quorum Books, 1990.

Stein Lawrence. Value Investing, New Strategies for Stock Market Success. New York: John Wiley & Sons, 1988.

-107-

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