Deciphering Financial Markets' Role in Economic Volatility
Deciphering the role of financial markets in economic volatility is a complex and essential task for economists and policymakers alike.As we delve into the intricate interplay between fund flows, investor demand, and market dynamics, a clearer understanding emerges of how financial markets can contribute to extreme fluctuations in the global economy.Recent research has highlighted the influence of investor demand on stock market prices, with heavier dividend payouts leading to price increases. Moreover, the rise of index funds and other large, slow-moving investors has amplified market sensitivity to shocks in fund flows, exacerbating volatility.These findings challenge the notion of an...
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