Chapter 17, Problem 18PS

Summary Introduction

Case summary:

IAAI (Institutional Advisors for All Inc.) is a consulting firm which provides services to all type of institutions and big investors regarding forecasting and determining long term trends through using normal analysis tools and models which determine how these trends should affect the performance of various investment. They have concluded that job creation and consumer confidence to inflation and interest rates and then incorporate the forecast movement in inflation rates into established model for explaining asset prices. They are primary concern about how the job creation and consumer confidence affect bond prices and how those should affect stock prices.

As per historical data there is positive trend in stock prices and this is factored into the forecast of overall economy that they deliver. They have considered fact that an upward trending stock market a positive economic indicator in itself; however they are not agrees it is a reason.

Character in this case:

IAAI

Adequate information:

IAAI is a service provider about forecasting the trends

Introduction:

Consumer expectation index reflects consumers buying tendency in the upcoming time. When it is moving towards positive side, it also affect positively stock price.