Lupia, Arthur and Grafstrom, Cassandra and Krupnikov, Yanna and Levine, Adam Seth and MacMillan, William and McGovern, Erin (2007): Loonies Under Your Bed: Misdirected Attention and the Diluted Value of Stock Market Reports.
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Many people pay attention to media reports of the US stock market’s performance. Using a data-based thought experiment, we cast the market’s recent highs and lows in an unusually unattractive light. The result matters because the economic and political factors that make it relevant are likely to continue. Using research in economics and psychology, we explain why so many investors and media reports are blind to the unattractive interpretation. To mitigate the blindness’ harmful consequences, we propose an alternate way of presenting stock market information. The alternative is easy to implement and can help citizens draw important inferences from the attention they already pay to financial reports. The word “loonies” refers to Canadian dollars, which play a key role in our analysis. Loonies are not causal of any of the key relationships in our analysis, but provide a useful device for making a broader point about key US asset values.
|Item Type:||MPRA Paper|
|Institution:||University of Michigan|
|Original Title:||Loonies Under Your Bed: Misdirected Attention and the Diluted Value of Stock Market Reports|
|Keywords:||stock market; money illusion; fiscal policy; information; learning; exchange rate|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
A - General Economics and Teaching > A2 - Economics Education and Teaching of Economics > A20 - General
|Depositing User:||Arthur Lupia|
|Date Deposited:||14. Sep 2007|
|Last Modified:||14. Feb 2013 10:27|
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