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11 votes
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Are stock exchanges market makers?

No, they are not market makers. A market maker is someone who (i) quotes two prices (one 'low' and one 'high'), (ii) will buy from any seller at the low quoted price (even if there is no ...
Ubiquitous's user avatar
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10 votes
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Screw foreign investment, lets just print money

"Foreign Direct Investment" is to be understood as bringing in an economy productive capital, and not just purchasing power. When an economy is seriously below full employment (of capital ...
Alecos Papadopoulos's user avatar
10 votes
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Is investment in real estate a real investment?

Purchasing new homes would count as an investment. According to Blanchard et al. Macroeconomics: a European Perspective pp 568 in glossary investment is defined: Investment (I): Purchases of new ...
1muflon1's user avatar
  • 56.7k
8 votes

Does stock picking work?

In general, stock picking does not work. For more information, see this keynote address by Daniel Kahneman, who found that stock-pickers perform worse than chance when they change stocks: https://...
Angela Pretorius's user avatar
8 votes

How to borrow at risk free rate

A private person will almost never have an access to borrowing at risk free rate. However, governments such as Germany or Switzerland can borrow at essentially for all practical purposes at risk free ...
1muflon1's user avatar
  • 56.7k
6 votes

Does stock picking work?

This question probably needs the obligatory Efficient Market Hypothesis answer to complement the great answer by Angela Richardson. Broadly, speaking, the EMH reasoning goes like this: Suppose that ...
Ubiquitous's user avatar
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5 votes
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What is the difference between a loan and an investment?

A loan is an agent lending funds to another agent. This money can be used for investment spending, or it can be used for personal consumption expenditures. It can be used to buy fixed assets like real ...
Ege Erdil's user avatar
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5 votes
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Can't a country grow its GDP without foreign investment?

No, you can definitely grow GDP without foreign investment or even trade. There are 3 basic ways to grow GDP. One is increasing human capital, which includes increasing population as well as ...
theresawalrus's user avatar
5 votes
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How does the GDP multiplier work?

The multiplier comes from the solution to the goods market equilibrium. In economics everything is endogenous. Increase in income increases consumption that increases demand, demand increases ...
1muflon1's user avatar
  • 56.7k
5 votes

Keynes' conception of investment

The investment ($I$) equals savings ($S$) result is derived by Keynes just from national identity, as a result it just hold by definition. Keynes in the passage starts with the simplified version of ...
1muflon1's user avatar
  • 56.7k
5 votes
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What would happen if individuals stopped investing their money in conservative low-yield products?

That imagined world, in which individuals only wanted to invest their money in stocks and not on any other product that has anything less than X% annually is inconsistent with how people think about ...
BrsG's user avatar
  • 1,642
4 votes

Why is investment not a cost in firms profit functions?

Both in Economics and in Accounting, there is the following fundamental principal: we have to subtract revenues generated in a given time period from costs incurred in the same time period (because ...
Alecos Papadopoulos's user avatar
4 votes
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Is a home (primary residence) purchase a form of investment in macroeconomics?

Home construction is a form of investment, home purchase is not. There's an important macro difference between creating the capital asset (construction) and transferring it (purchase). Regarding ...
dismalscience's user avatar
4 votes
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Why does the answer not include increased negative unplanned stock investment?

Scenario “C” does not specify “unexpected.” Since greater growth was expected, planned inventory investment would rise to meet higher expected demand.
Brian Romanchuk's user avatar
4 votes
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How to compare investments with different risk and expected return?

The trade-off between risk and expected returns depends on your own preferences. Assume that you are expected utility maximizer and let the return of the investment be given by the random variable $X$....
tdm's user avatar
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4 votes

Is there any problem with this scheme?

Yes, there are such schemes. They are called pyramid schemes, and the problem is that they are illegal in most countries.
VARulle's user avatar
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3 votes
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In the event of a company's bankruptcy, how does a SPV continue operations if it can no longer collect payments on collateral

Servicing and origination don't have to be done by the same firm. It is quite common that the financing company contracts out the servicing rights on the loans they originate. Servicers, like many ...
BKay's user avatar
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3 votes
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What sort of impact would one expect on investment as a result of an approaching election?

There are many ideas to look into and some research: IDEAS Elections are presumably a time where the future becomes uncertain in the sense that there is a likelihood the new leader will change the ...
Fix.B.'s user avatar
  • 2,668
3 votes

Does stock picking work?

I think this Quora discussion on the fund manager illusion of validity told most of the story. As one commenter has pointed out the flaw of typical fund manager attempt to use Berhshire Hathaway to ...
mootmoot's user avatar
  • 381
3 votes
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Where does investment originate from in the circular flow model?

Investment ultimately comes from households through savings. From a macroeconomic perspective savings is equal to to investment ($S=I$). Investment comes from income because saving is portion of ...
1muflon1's user avatar
  • 56.7k
3 votes
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What does it mean, 'Higher interest rates attract FIIs and FPIs'?

Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI) can and do invest in government securities as well. There may be restrictions of course leading to imperfect capital ...
Dayne's user avatar
  • 1,735
3 votes

Is investment in real estate a real investment?

By the way, after a house is built (whether it was built this year or many years ago) it does provide economic value. If renters live there, then the rent they pay is counted as a service in GDP. And ...
Daniel's user avatar
  • 294
3 votes

Does treasury pay interest+ face value to the fed?

Yes, Fed sends all its profit including the ones it earns on government debt back to the treasury (this was already answered on this site here). Fed can create an unlimited amount of money by buying ...
1muflon1's user avatar
  • 56.7k
3 votes
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Proximity-concentration hypothesis: homogeneous firms and symmetric countries

$π = φ^{(σ−1)}*\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}+φ^{(σ−1)}\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}-f_E-2f_D$ $π = 2\frac{f_E+f_D}{(1+τ^{(1-σ)})}-f_E-2f_D$ $(1+τ^{(1-σ)})π = 2(f_E+f_D)-(1+τ^{(1-σ)}...
Jesper Hybel's user avatar
  • 3,386
3 votes
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Risk seeking investors: Do they benefit from return at all?

Is it because risk seeking investors also get some utility from expected return? Yes. It is a common assumption that investors invest to get returns, so in this good space returns are indeed a "...
Giskard's user avatar
  • 29.2k
3 votes

Are major banks in US necessarily going to benefit from the rise of federal fund rates?

Major banks will not necessarily benefit from a rise in the federal funds rate. One way major banks make money is from the difference between the interest rates they borrow at and the rates they lend ...
James Wattam's user avatar
3 votes
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Is there any problem with this scheme?

You already know the problem: Now, as there isn't an infinite amount of customers, somebody inevitably fails to recruit and they loses their invested amount. That's the problem. But, If they ...
Quitting Due To Antisemitism's user avatar
3 votes

Why do multiple investment funds exist?

First, it is often hard to tell skill from luck. A fund that is leading today may be lagging tomorrow. Knowing that, investors may think twice before investing in a leading fund. Second, not all ...
Richard Hardy's user avatar

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