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Asset price movements that are not related to economic fundamentals result in the occurrence of asset bubbles.
The role of government in the economy encompasses both protection and intervention. Conservative politics are relatively resistant to change, but they do not overlook the role that government plays in the regulation and control of economic activities (Evanoff, Kaufman & Malliaris, 2012). The occurrence of asset bubbles and related scenarios in the economy trigger critical decision making pursuits among involved stakeholders. The fact is such occurrences distort economic performance, leading to the realization of variant hardships in the many sectors of the economy. In this respect, the government stands a chance to manage the situation through protection and intervention. This means that the government should remain vigilant over sectorial "animal spirits" in order to protect the economy and safeguard public interests, as well as take relevant actions in the event that such "animal spirits" bursts (Evanoff, Kaufman & Malliaris, 2012). The idea is to create coherence among economic variables for enhanced economic
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“There is no simple definition of financial bubble but one dynamic is clear: they become a financial black hole that attracts huge amounts of investment money. An investor who recognizes a bubble and its cause can make a lifetime of profit in a short time.” (Augen 258) Let us discuss some of the important bubbles in the financial history: Tulip Bubble (Dutch Tulip bubble) In the late 15th century tulips were introduced in the Dutch market from turkey.
The impact was intense. There were people had lost their homes and jobs, all stocks within the financial companies had been made worthless, it was the signal of a start over for the lives of many, who had been affected directly or indirectly. This was given several names, the common ones being The Global Financial Crisis or 2008 financial crisis.
The CAPM model therefore relies on the ability to measure market volatility as a whole. With several possible investments available in the market, the model assumes that one can accurately assess the volatility of each of these investments. This is impossible.
Generally it looks after the policy formulation process and how it concentrates on the growth strategies which will drive the GCC countries on the path of progress. Introduction Gulf of Cooperation Council (GCC) countries have many things in common. All of the GCC countries are major oil exporters and they have fixed exchange rate regimes which exposes them to the risk of international oil prices.
Whilst some of these data may be due to data-snooping from the analytical work of armchair researchers attempting to discern some meaning to what could just be a simple collection of facts, much of the empirical data such as beta, stock volatility, co-variances, etc.
Supply shortage and/or a money supply over-expansion aggravate an asset bubble but demand-pull inflation account for majority of the modern asset bubbles (Amadeo Para 1).
According to Fan Gang, the central bank advisor, China is one of the emerging markets that
China has been accused of stifling the creativity of its professionals. China’s economic growth has been unprecedented (Hu, 89). The country has grown at an average of 9.6 percent from 1990 to 2010. The
The risk free rate is the government bond ideally, that has a fix ten years. The Beta is the true measure of the risk that is in the stock that one has invested on.
With the risk in it, measure the volatility of the investment. It is in this