Economics and Investment Markets Flashcards

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1
Q

A closet index fund

A

A fund that advertises itself as being actively managed but is actually close to being an index fund

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2
Q

Inter-temporal rate of substitution

A

The ratio of the marginal utility of consumption s periods in the future to the marginal utility of consumption today

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3
Q

Pt,s

A
  • The price today, t, of a default-free bond paying 1 monetary unit of income s periods in the future
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4
Q

The price uncertainty of a two-period bond at t = 1 gives rise to a risk premium, even if the bond is risk-free

A
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5
Q
A
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6
Q

Taylor’s rule

  • prt - the policy rate at time t
  • lt - the level of real short-term interest rates that balance long-term savings and borrowing in the economy
  • ιt - the rate of inflation, ιt is the target rate of inflation
  • Yt and Yt are, respectively, the logarithmic levels of actual and potential real GDP
A
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7
Q

Gilt

A

Bonds that are issued by the British government and generally considered low risk. Gilts are the U.K. equivalent to U.S. Treasury securities

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8
Q

Break-even inflation (BEI)

A

The difference between the yield on a zero-coupon default-free nominal bond and on a zero-coupon default-free real bond of the same maturity is known as the break-even inflation

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9
Q
  • First oil shock
  • Second oil shock
A
  • 1973
  • 1979
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10
Q
  • US government STRIPS (Separate Trading of Registered Interest and Principal Securities)
  • US government TIPS (US Treasury Inflation-Protected Securities)
A
  • Zero-coupon default-free nominal bond
  • Zero-coupon default-free real bond
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11
Q

Value vs growth stocks performance

A

Value stocks tend to outperform growth stocks in the aftermath of a recession, and growth stocks tend to outperform value stocks in times when the economy is expanding

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12
Q

Consumer staples (non-cyclical)

A

Essential products such as food, beverages, tobacco and household items. Consumer staples are goods that people are unable or unwilling to cut out of their budgets regardless of their financial situation. Consumer staples stocks are considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing. Also, people tend to demand consumer staples at a relatively constant level, regardless of their price

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13
Q

Consumer discretionary (cyclical)

A

A sector of the economy that consists of businesses that sell nonessential goods and services. Companies in this sector include retailers, media companies, consumer services companies, consumer durables and apparel companies, and automobiles and components companies

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14
Q
  • Sell-side analysts
  • Buy-side analysts
A
  • Analysts employed by brokerages
  • Analysts employed by an investment manager or institutional investor
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15
Q

lt,s

A

Yield to maturity on a real default-free investment today (t), which pays one unit of currency s periods in the future

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16
Q

lt,s for an investment horizon of 1 year and a payoff of 1$

A