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Understanding asset prices: an overview

Author

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  • Peter Hördahl
  • Frank Packer

Abstract

This paper reviews analytical work carried out by central banks that participated at the Autumn Meeting of Central Bank Economists on "Understanding asset prices: determinants and policy implications", which the BIS hosted on 30-31 October 2006. The paper first discusses some general properties of asset prices, focusing on volatilities and co-movements. It then reviews studies that look at determinants of asset prices and that attempt to estimate a fair value of assets. The next part of the paper focuses on research that aims at measuring the impact of changes in asset wealth on the real economy. It then goes on to discuss how central banks use information from asset prices to develop indicators of market expectations that are useful for monetary policy purposes. Finally, the paper reviews central banks' views on whether monetary policy should react in a direct way to asset price developments.

Suggested Citation

  • Peter Hördahl & Frank Packer, 2007. "Understanding asset prices: an overview," BIS Papers, Bank for International Settlements, number 34.
    • Handle: RePEc:bis:bisbps:34
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    References listed on IDEAS

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    1. repec:bla:intfin:v:5:y:2002:i:2:p:139-64 is not listed on IDEAS
    2. Dewachter, Hans & Lyrio, Marco, 2006. "Macro Factors and the Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 119-140, February.
    3. Claudio Borio & Patrick McGuire, 2004. "Twin peaks in equity and housing prices?," BIS Quarterly Review, Bank for International Settlements, March.
    4. Döpke, Jörg & Hartmann, Daniel & Pierdzioch, Christian, 2006. "Real-time macroeconomic data and ex ante predictability of stock returns," Discussion Paper Series 1: Economic Studies 2006,10, Deutsche Bundesbank.
    5. Michael D. Bordo & Olivier Jeanne, 2002. "Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy," NBER Working Papers 8966, National Bureau of Economic Research, Inc.
    6. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mesly, Olivier & Chkir, Imed & Racicot, François-Éric, 2019. "Predatory cells and puzzling financial crises: Are toxic products good for the financial markets?," Economic Modelling, Elsevier, vol. 78(C), pages 11-31.
    2. Olkhov, Victor, 2022. "The Market-Based Asset Price Probability," MPRA Paper 113096, University Library of Munich, Germany.
    3. Olkhov, Victor, 2021. "Three Remarks On Asset Pricing," MPRA Paper 107938, University Library of Munich, Germany.
    4. Stijn Claessens & M Ayhan Kose, 2017. "Asset prices and macroeconomic outcomes: a survey," BIS Working Papers 676, Bank for International Settlements.
    5. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    6. Li, Yun Daisy & Iscan, Talan B. & Xu, Kuan, 2010. "The impact of monetary policy shocks on stock prices: Evidence from Canada and the United States," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 876-896, September.
    7. Maurizio Polato & Josanco Floreani, 2010. "Distribution of Illiquid Financial Products: The Case of Italy," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(4), pages 848-859, February.

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