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The exchange rate disconnect puzzle: The exchange rate disconnect puzzle, also one of the so-called real exchange rate puzzles, concerns the weak short-term feedback link between exchange rates and the rest of the economy. In most economies, the exchange rate is the most important relative price, so it is surprising, and thus far unexplained ...
In economics, a puzzle is a situation where the implication of theory is inconsistent with observed economic data. An example is the equity premium puzzle, which relates to the fact that over the last two hundred years, the risk premium of stocks over bonds has been around 5.5%, much larger than expected from theory. The equity premium puzzle ...
The most notable example is the equity premium puzzle Mehra and Prescott (1985), [3] where the Complete Market model failed to explain the historical high equity premium and low risk-free rate. Along with the Equity premium puzzle other counterfactual implications of the Complete Market model are related to the empirical observations concerning ...
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
The US market was the most successful stock market in the 20th century. Other countries' markets displayed lower long-run returns (but still with positive equity premiums). Picking the best observation (US) from a sample leads to upwardly biased estimates of the premium.
Obstfeld and Rogoff (2000) identified the purchasing power and exchange rate disconnect puzzle as one of the six major puzzles in international economics. [4] These were the consumption correlation puzzle, home bias in trade puzzle, the equity home bias puzzle, the Feldstein-Horioka savings-investment correlations puzzle, and the exchange rate regime puzzle.
Cathie Wood is the head of money management firm Ark Invest and is best known on Wall Street for her bullish stances on emerging technologies in artificial intelligence (AI) and genomics.
The Feldstein–Horioka puzzle is a widely discussed problem in macroeconomics and international finance, which was first documented by Martin Feldstein and Charles Horioka in a 1980 paper. [1] Economic theory assumes that if investors can easily invest anywhere in the world, acting rationally they would invest in countries offering the highest ...