Asset Valuation During Economic Booms

Aug 1, 2022 · As this gap widens, asset valuation becomes more funding-based rather than cash flow-based. Therefore, the probability of a market crash increases with credit expansion as companies increase their exposure to riskier projects. This process implies a “latent” asset correlation during the boom phase, which becomes “effective” with the crash. Aug 1, 2022 · As this gap widens, asset valuation becomes more funding-based rather than cash flow-based. Therefore, the probability of a market crash increases with credit expansion as companies increase their exposure to riskier projects. This process implies a “latent” asset correlation during the boom phase, which becomes “effective” with the crash. Apr 4, 2025 · The boom -bust cycle in a global economy is an inevitable phenomenon, characterized by periods of rapid economic expansion followed by contractions. This cyclical pattern affects asset prices significantly, as they tend to rise during booms and fall during busts. Apr 4, 2025 · The boom -bust cycle in a global economy is an inevitable phenomenon, characterized by periods of rapid economic expansion followed by contractions. This cyclical pattern affects asset prices significantly, as they tend to rise during booms and fall during busts. Without the confluence of events—structural changes in financial markets, expansionary fiscal policies, and expansionary monetary policies—the asset price cycle and the associated economic booms and recessions might not have occurred. Without the confluence of events—structural changes in financial markets, expansionary fiscal policies, and expansionary monetary policies—the asset price cycle and the associated economic booms and recessions might not have occurred. Introduction Policymakers have long debated how to respond to asset price booms and potential bubbles, or when asset prices surge to levels that seem to exceed the value of the dividends that assets are expected to yield. Introduction Policymakers have long debated how to respond to asset price booms and potential bubbles, or when asset prices surge to levels that seem to exceed the value of the dividends that assets are expected to yield. The book shows how economic activity affects asset prices and the financial market, and how asset prices and financial market volatility and crises impact economic activity.