Expectations of asset values by participants in financial markets

Question

Quizplus · Accepted Answer

Participants' expectations of asset values are a crucial factor in determining both current market prices and changes in market prices. When participants expect asset values to rise, they will be willing to pay more for the asset, driving up its current market price. Conversely, if participants expect asset values to decline, they will be less willing to pay as much for the asset, driving down its current market price. These changing expectations can also lead to changes in market prices over time. Therefore, expectations of asset values play a crucial role in financial markets.

Expectations of Asset Values by Participants in Financial Markets