Chapter 21: Other influences on investment markets

Question 1

Factors influencing investor preferences

Answer 1

• A change in their liabilities
• change in regulatory or tax regimes
• uncertainty in the political climate
• “fashion”or sentiment altering, sometimes for no discernible reason
• marketing
• investor education undertaken by the suppliers of a particular asset class.

Question 2

Demand for an asset will change if ether: (2)

Answer 2

• Investor perceptions of the characteristics of the asset alter (principally risk and expected return)
• investors opinions of the properties of the asset remain unchanged but external factors alter the demand for the asset

Question 3

External factors that may alter demand for an asset

Answer 3

• investors’ incomes
• investors’ preferences
• price of other assets (may be substitute goods)

Question 4

Bond market supply is controlled…

Answer 4

largely by the government’s fiscal deficit and its strategy for financing the deficit.

Question 5

Other factors influencing DEMAND for investments

Answer 5

🔼 - CHANGE in liabilities
F - Fashion (fashionable investments)
U - Political UNCERTAINTY
M - MARKETING & Investor preferences
E - EDUCATION from suppliers (eg bitcoin, investors weren’t educated)
🔼 - Change in taxes or regulation