From Recession with Love

Jan Libich

World Economics, vol. 0, issue 0

Abstract: This article examines why some conventional finance theory no longer seems to apply in the post-2008 period. It discusses the reasons for financial markets responding to good news about economic fundamentals as if it was bad news. My controversial conjecture is that (as long as inflation is no longer an imminent threat) recession news would be welcomed by the financial markets – boosting equity prices rather than lowering them. I further document the increasingly-important “flight to focal points†phenomenon, offering examples from the meme stocks and cryptocurrency asset classes as well as some predictions going forward. This paper was accepted September 23, 2022; published online October 26, 2022.

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Persistent link: https://EconPapers.repec.org/RePEc:wej:wldecn:873

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