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Essay / Research Paper Abstract
This 4 page paper defines and explains the following terms; expectation, segmented market, liquidity premium theories, the market setting of security price, Keynesian liquidity preference and lastly nominal and real interest rates.
Page Count:
4 pages (~225 words per page)
File: TS14_TEecterms.rtf
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Unformatted sample text from the term paper:
group of observers believe the market or a specific factor on or in the market to move. For example, it may be expected by some that the interest or
inflation rates will be increased, it may be expected by some that they will decrease. Where there is an expectation this will influence any decisions that are made. Expectations
may be formed in many ways, there may be the use of tools such as Efficient Market Hypothesis (EMH) with the weak, semi strong and the strong form are all
different variations and may lead to different expectations when looking at the way the securities market may perform. Other tools may look at simple regression forecasting or may even work
only instinct or intuition. Where there are expectations held by a majority of those in a market this can influence the way the market behaves. For example, if the
majority of investors all believe that the market is going to rise, they will increase buying, which in turn will increase prices in response to supply and demand, causing the
market to rise. The opposite is also true, as such expectations is a major influence on the market as it will impact on the decisions and behaviour of those acting
in the market. Segmented market A segmented market is as it sounds, the market is segmented into different distinct markets that are individually identifiable by various set of characteristics
which may appeal to different investors. They may be similar types of investments such as equity, but under segmented market theory there will be costs of arbitrage across the different
segments. The segmented hypothesis states that the investors create the segments according this their preferences, for example, some investors may limit themselves to bonds of a certain maturity
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