Questions tagged [investment]
Regarding the purchasing of capital and productive materials by firms. this differs from saving which is a similar action done by consumers.
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Saving equals investment according to Keynes
In "The General Theory of Employment, Interest and Money", Chapter 6 The Definition of Income Saving and Investment, John Maynard Keynes says:
Income = value of output = consumption + ...
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Would Bretton-Woods capital controls have prevented the export-based industrialization of China and the deindustrialization of the West?
I sometimes hear this in a certain kind of political discourse, namely that in the "good old days" of Bretton-Woods capital controls were a thing (I don't dispute this) and that consequently ...
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How will market self-correct so that passive investing never becomes 100 %?
The premise of the paper titled The Arithmetic of Active Management by Sharpe is that active managers as a group have to necessarily underperform passive managers as a group because passive investors ...
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How to calculate generated interests while having two different nominal rates compunded into a single quarter
I would like to calculate the interest generated from an investment within a time period of 8 months. The bank manages an interest rate of 3.5% p.a. for six months, and the last two months is 1%. The ...
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Which economic model and variables should I use to investigate the impact of sentimental shocks in central bank statements on investment?
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I am currently working on a research project that aims to investigate the impact of sentimental shocks in central bank statements on investment in the economy. I am looking for guidance on selecting ...
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Implications for the economics literature of possible mistakes in Black-Scholes-Merton option pricing?
If this preprint (which is discussed here on QSE) is correct in showing that there are mathematical mistakes in the Black-Scholes-Merton option pricing framework, are there strands of the economic ...
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Does discount rate and cost of capital mean the same thing to compute levelised cost of energy (LCOE)?
I came to understand that cost of capital and discount rate are two different parameters, although they are also used ...
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Accounting for inflation when calculating the discount rate
Good afternoon! I am evaluating an investment project and I want to calculate the discount rate based on a risk-adjusted method.
Calculation formula: discount rate = risk-free rate + risk adjustment + ...
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What should policymakers do to increase national savings rate of a developing economy to decrease risk of volatility in ER due to withdrawl of FPIs?
Case in point is a developing country who find it's domestic savings insufficient and in turn depends on Foreign portfolio investment to increase it's productivity, wages and drive it's economic ...
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Do an increase in foreign investment increase the value of domestic currency?
I'm now studying about international trade and policy. I've known that higher interest rate would attract foreign investment therefore the demand for domestic's currency gone up and increase the value ...
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Additivity of the Fisher price index for the same component
I have a dataset of yearly gross investment since 1970 in chained 2010-prices or "Fisher index prices". I want to depreciate each year's investment and add them up, however, reading about ...
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CDOs, Synthetic CDOs and 2008 financial crisis
I have recently been researching about the 2008 financial crisis and after hours of reading, I have been left with some gaps in my understanding of the events that lef to the collapse of the market in ...
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Does doing nothing produce negative net present value? How can we show that?
When evaluating investment projects, a popular approach is to calculate the net present value (NPV). A positive NPV suggests carrying out the project is better than not doing that, in light of the ...
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How does FDI from one country affect the inflation outlook of another?
How do the relations between FDI and inflation work in the current world?
(Mainly looking at the relationship between Canada and its FDIs from the EU and China.)
Context and my thoughts:
I've been ...
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Understanding Minsky’s framework for rate transmission
Relevant except from Hyman Minsky:
Although present value reversals occur-they certainly did in the 193Os
and again to a much more limited extent in 1974-75 and 1981-82-the
cyclical contractions and ...
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Is there any problem with this scheme?
Edit: I searched about Pyramid scheme but a site said that it is a marketing scheme recruiting more people to make profit.
Apparantly this site was wrong.
But, that's the reason that I asked this. So, ...
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"Rate of exploitation" and savings growth
The normative implication in Marxian economics is that "exploitation of labour-power" is a bad thing. I'm hoping to understand quantitatively who are the winners and losers.
Definitions:
A &...
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How many hedge funds are there?
For personal interest. This 2022 special report on hedgeweek.com says,
Cayman is domicile to over 23,000 CIVs, including about 80% of all international hedge funds
which suggests a maximum global ...
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Investing and equity
I'm having trouble understanding how a typical investment works, and so far most textbooks are pretty vague with their language.
Let's say you invest 200 dollars in a startup (let's start small). The ...
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Do stock indexes (S&P 500, DJ, ...) directly depend on inflation?
I can't understand what stock indexes really are. What they are representing?
As far as I know, they represent relative change (in points) in the prices of shares of a given set of companies. Is that ...
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The case where the entire amount of investment goods are supplied by the imports
A positive investment multiplier does not exist in an open economy simple Keynesian
model when the entire amount of investment goods is supplied from import. Examine
the validity of this statement.
My ...
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How are retail investors served on the primary market?
When a company issues new shares on the primary market, is it possible or even obligatory to reserve a given amount for retail investors?
If it is possible: How often is this done? (From Wikipedia I ...
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Differences between stocks and bonds
I just learned what bonds are. They seem similar to stocks, but different in key ways. I'd like to know all the ways. I'll list the differences that I currently believe they have. The only reason I'm ...
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Investment variable in GDP - Data Selection - World Bank, IMF
I want to test the correlation of a variable with investment in the national income formula C+I+G+NX. Using IMF data, there are a lot of different investment variables in different formats. What would ...
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Is there a consensus that carbon prices are poor at driving investment?
A post dated 2017 by Skillings on the website of E3G, a think tank focusing on the political economy of climate change, refers (in the 5th paragraph) to:
"recent emerging consensus that, whilst ...
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Why does interest rate differential affect capital flow in equities?
With the recent news of US fed hikes, there are emerging markets where central banks have decided not to raise rates, like in India, Indonesia, China, etc. The common theme I read everywhere is this - ...
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Is there a scenario where investment and interest rates could both be increasing
Is there a scenario where investment and interest rates could both be increasing?
I know that lower interest rates lead to increase borrowing and thus increased investment spending. So there is ...
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Information Asymmetry in capital markets: EU ad-hoc announcements/8-K filings in other countries
In many countries, companies whose securities are traded on a stock exchange are subject to an ad-hoc disclosure requirement. This ad-hoc announcement publication duty refers to the obligation to ...
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Are major banks in US necessarily going to benefit from the rise of federal fund rates?
https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/
It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of ...
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Which model of capital accumulation do macroeconomists prefer, renting model or investing model?
Consider a closed economy with perfect competition, no government and no fiat money. Consumer goods are aggregated as a single type of goods and prices are measured in units of goods. For such an ...
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Why do we have *daily* series of T-bill yields?
I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
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Why we say "active investing puzzle" while we already know the reason?
Han,2021 describe active investing puzzle as:
Notably, individual investors trade actively and have invested in
active investment funds for decades, and they thereby have on average
underperformed ...
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How does foreign aid money help another country develop?
How does fiat currency help a country's economic growth? For example, if a certain country such as the U.S or Brazil gives 1billion dollars to a developing country like Angola or Congo, how does that ...
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How to compare investments with different risk and expected return?
Supposing I can choose to invest money in several different investments, each having
risk $\sigma_i$, for example, calculated as standard deviation
and expected return $r_i$
let's assume they have ...
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Risk seeking investors: Do they benefit from return at all?
Starring on the indifference curves for different types of risk preferences I ask myself why the risk seeking investor would be indifferent between an investment on the far left of his indifference ...
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Why does a risk-return relationship that has historically been positive confirm risk averse investors?
As I am reading through a corporate finance textbook I came across the following figure that plots the relationship between risk and return for different asset classes:
The textbook states:
Figure ...
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Confusion regarding the definition of inflation premium
'Inflation premium' is defined here as the higher return that investors demand in exchange for investing in a long-term security, where inflation has a greater potential to reduce the real return.
In ...
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Relationship between taxation, national debt, and pool of private investment money
We've all heard the argument that an increase in taxation of the wealthy, or of investment earnings in particular (capital gains + dividends) will discourage investment and hurt the overall economy. ...
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What would happen if individuals stopped investing their money in conservative low-yield products? [closed]
There has been a rise in popularity of retail investing in stocks driven by higher annual % returns. The % returns offered by things like banking savings accounts or government bonds seem a lot less ...
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Does savings always equal investment? Are there any cases where savings could be removed from the economic system altogether and break the balance?
Assuming a closed economy, does savings always have to equal investment?
If an individual produces a certain amount of a resource and saves it, that becomes part of the savings of the economy. However,...
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Proximity-concentration hypothesis: homogeneous firms and symmetric countries
Hi everyone I am running into a stone wall and don't seem to be able to solve this, can someone show me the steps how I can insert 1 into 2 and get 3.
$B=\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}$
$π =...
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What happens to an MBS if all the underlying mortgages are fully paid back by the borrowers much before the maturity date?
What would happen to an MBS (mortgage-backed security) if hypothetically speaking all the underlying mortgages were fully paid back by the mortgagees (borrowers), much before the maturity date?
I ...
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How did investment go from exogenous to endogenous in the IS/LM model?
Context: I am currently taking an introductory course to macroeconomics and we are on the topic of Keynesian Economic and the IS/LM model.
Initially we saw that the investment (I) component of ...
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Why do stocks that don’t pay any dividends change price when the company does better?
I don’t understand why (non-dividend paying) stocks increase in price when a company is successful; is it just because everyone expects that everyone else will find it more valuable because the ...
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Negative Interest Rates and Pension Funds [closed]
How do negative interest rates impact the future prospect and business model of (defined benefit) pension funds?
What could be winning investment strategies for pension funds in a negative interest ...
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Perfectly functioning credit markets and consumer saving
Today in my Macroeconomics lecture, while covering the Real Intertemporal Model with Investment (Chapter 11 of Williamson's Macroeconomics), my professor proponed that a key assumption to not make ...
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Uses of simple interest
Recently I started to read again Brealey & Myers's "Principles of Corporate Finance" (an older edition I hold it since I attended to the university course on Economics and Corporate ...
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Why doesn't stock market help to boost the economic growth directly?
For example, during the recession, the central bank often goes to buy financial instruments that are riskier than government bonds (such as corporate bonds)- which is called "quantitative easing&...
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Treatment of natural disasters and wars in consumption of fixed capital
Assets destroyed by natural disasters and wars are not included in consumption of fixed capital (CFC) in the US NIPA or the UN SNA.
Suppose though that the US decided to start including such asset ...
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Does treasury pay interest+ face value to the fed?
heard all the profit that the fed makes goes into treasury.. does that mean the treasury department can make unlimited money buy selling bonds to the fed? like if they issue bond to people, and the ...
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