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Practice of investment management - Essay Example

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The objective of the study is to determine the impact of current trend of increasing federal fund rate on equity, sovereign bonds, commodities, and foreign exchange. Subsequently, the study will also be executed with the intention to forecast its return in the short term and…
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Download file to see previous pages This change in the interest rate is also notable in the federal rate. The hike in the federal rate does not have a major immediate effect in the stock market of the US. This suggests that in short term, the impact of federal rates on the equity indices is not as prominent as deemed. However, it has a gradual, but significant impact on equity indices of the nation in the long term. In this regard, it is notable that the hike in the federal rate leads to the increase in the equity indices of the nation at large. The data collected from Bloomberg L. P. (2015) reveals that there has been an increasing trend in the federal fund rates in the US within the last one year i.e., from March, 2014. This is eminent from the increasing linear slope through graphical representations of the data. The underneath graphical representation depicts the same in a compressed but elaborative form.
The set of valuable data collected from Market Watch, Inc (2015) also suggests that there has been an increasing trend in the NYSE Equity indices from March 2014. Further, a trend analysis of the collected data predicts that there would be an increase in the equity market in the long run i.e. 2 years. The quantitative analysis predicts that equity indices of NYSE would increase to 11521.72 points. However, it is also estimated that the increasing trend would not have a major impact on the short-term operations, which can be 3 months in general. The statistical analysis predicts that after three months i.e. May 2015, the NYSE equity index would have 11012.05 points. Correspondingly, increase in the equity market through the rise in the federal fund rates is also proved with the help of positive correlation between the two variables. The correlation value determined is 0.319133833 (Market Watch Inc, 2015). The underneath graphical representation depicts the short term (3 months) and ...Download file to see next pagesRead More
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