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Special Report on

The “Fed Model”

the fed model special research report Photo by www.russianplaza.com
The so-called Fed model postulates that the dividend or earnings yield on stocks should equal the yield on nominal Treasury bonds, or at least that the two should be highly correlated. In US data there is indeed a strikingly high time series correlation between the yield on nominal bonds and the dividend yield on equities. This positive correlation is often attributed to the fact that both bond and equity yields comove strongly and positively with expected inflation. Contrary to some of the extant literature, we show that this effect is consistent with modern asset pricing theory incorporating uncertainty about real growth ...
Its first edition was released in 1994. Its fourth edition was released on November 27, 2007. According to Pablo Galarza of Money , "His 1994 book Stocks for the Long Run sealed the conventional wisdom that most of us should be in the stock market." The Washington Post called it one of the 10 best investment books of all time.
REVIEWS AND OPINIONS
Mish's Global Economic Trend Analysis: The Question "Are Stocks a ...
Dr. Ed Yardeni of Yardeni Research takes one side of the debate and says "stocks are cheap" according to a model, now dubbed the “Fed’s Stock Valuation Model”. I am quoted in the article, taking a different view of course, but I want to add to the thoughts I expressed in the article. First a few snips from Lipton's article ... Certainly, by employing some basic measures to compare the relative value of stocks and bonds, equities appear attractive. Dr. Ed Yardeni of Yardeni Research made the case this morning that stocks seem cheap and bonds seem expensive according to a simple model that ... market research, surveys and trends
The Question "Are Stocks A Screaming Buy Relative To Bonds ...
Dr. Ed Yardeni of Yardeni Research takes one side of the debate and says "stocks are cheap" according to a model, now dubbed the “Fed’s Stock Valuation Model”. I am quoted in the article, taking a different view of course, but I want to add to the thoughts I expressed in the article. First a few snips from Lipton's article ... Certainly, by employing some basic measures to compare the relative value of stocks and bonds, equities appear attractive. Dr. Ed Yardeni of Yardeni Research made the case this morning that stocks seem cheap and bonds seem expensive according to a simple model that ... market research, surveys and trends

SURVEY RESULTS FOR
THE “FED MODEL”

CARPE DIEM: NY Fed's Model Predicts End of Recession in 2009
"Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity." On Monday, the New York Fed released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through February 2009 and its recession probability forecast through February 2010 (see chart above, click to enlarge). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (currently at 2.57%) to calculate the probability of a recession in the United States twelve months ahead (see chart below of ... industry trends, business articles and survey research
Daily Speculations
Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place. Home Write to us at: (address is not clickable) The �Fed Model� Similar in spirit to the Stock-Bond Ratio is the �Fed Model�, which postulates a relationship between market returns, P/Es, and bond market yields. It has been thought to be used by the Fed itself and was originally named and extended by Dr. Edward Yardeni , now at Oak Associates Ltd. Some (such as Clifford Asness, founder of the $23 billion ... industry trends, business articles and survey research
RELATED NEWS
Equities for Income Instead of Bonds?
Does the recent dive in government bond yields mean that equities look remarkably cheap, or is a more fundamental shift going on? Japanese 10-year bond yields have dipped below 1% for the first time in seven years, reports today’s Financial Times. Meanwhile, the yield on Japan’s Topix equity index is double that, according to Barron’s , so you’re paid twice as much to hold equities as government bonds. In the US, a yield comparison using dividends isn’t quite as compelling for an equity investor: 2.9% on 10-year Treasuries, compared with 1.96% on the S&P 500. Nevertheless, the Fed Model, which ... market trends, news research and surveys resources
Fixed-Income Bubble: Should Investors Just Buy Stocks?
Discussions about a bond market bubble have been all the rage as of late. Historically low yields are frequently cited as evidence that the bond markets are in a bubble. Another often cited argument, specific to government bonds, is that the supply of bonds keeps growing and eventually investors will reject purchasing this paper at such low yields – which will force yields higher and investors who previously bought into the market will get burned. A third argument is that inflation will likely increase over the coming years which will, in terms of real dollars, lead to losses for bond investors. Most people in this ... market trends, news research and surveys resources

INFORMATION RESOURCES

Don't fight the Fed Model!
Overall, readers should embrace the Fed model because it yields important ... Asness (2003), for example, calls for FAJ readers to fight the Fed model ... technology research, surveys study and trend statistics
FRB: Press Release--Board issues proposed amendments to Regulation ...
The Federal Reserve Board on Wednesday issued for public comment proposed amendments to Regulation Z (Truth in Lending) that are intended to improve the effectiveness of the disclosures consumers receive in connection with credit card accounts and other revolving credit plans by ensuring that information is provided in a timely manner and in a form that is readily understandable. �The goal of the proposed revisions is to make sure that consumers get key information about credit card terms in a clear and conspicuous format and at a time when it would be most useful to them,� said Federal Reserve Board Chairman Ben S. ... technology research, surveys study and trend statistics
REAL TIME
THE “FED MODEL”
  1. profile image leenaAphotog Another fed hill session in the morning...an up and coming model/ actor.
  2. profile image jonathon_welch RT @Mrbosslady: I'm tired of looking at ads for work and thinking the model needs to be fed a cheeseburger.
  3. profile image Mrbosslady I'm tired of looking at ads for work and thinking the model needs to be fed a cheeseburger.
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QUESTIONS AND ANSWERS
WikiAnswers - Evolution of The field of Finance
Today's Finance is still in its infancy as a science. The domain of what we know pales in comparison to what we actually know we don't know . For example, we know that our understanding of the basic mechanisms of asset valuation (stocks, real estate, gold) is limited , confused and non-operational for the most part. Who can tell and predict the value of stocks today? Investors are offered conflicting views (rational vs. irrational), quick recipes, and voodoo advice. The "pseudo" scientific mathematical models that are offered today, far from resolving real-world problems do revel in their own complexity in ...
Google Answers: Cost of corporate scandals to US economy
What is a good estimate for the total domestic economic cost of all the recent corporate scandals? From Enron to Worldcom and all of the others. Has anyone put a dollar amount on the damage to the US economy? Hi! Thanks for the question. The economic forum entitled “Cooking the Books” made such an estimate. The website where the transcript of the presentation is located is unavailable right now but fortunately for us, Google saved it in its cache. “Cooking the Books” ...