David Jane: Why investors must look across asset class boundaries

Identify mispricing

clock • 3 min read

In the perfect world envisaged by market theorists, all obvious anomalies would be arbitraged away - and yet, writes David Jane, anyone who has worked in financial markets for any time knows this is simply not the case

One of the principal features of the current, long-running period of ultra-low interest rates and inflation has been the distortion of asset prices. Investors now seek returns from riskier assets because the prices of lower risk assets are inflated by central bank intervention. This is nothing new and has been the case for some time, but some of the anomalies created by this effect have become extreme. In the perfect world envisaged by market theorists, particularly those in the ‘efficient market' hypothesis camp, all obvious anomalies would quickly be arbitraged away by return-seeking i...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Markets

Market Movers: Advice industry cautious about Trump's long-term market impact

Market Movers: Advice industry cautious about Trump's long-term market impact

‘Short term should be positive - more concern over longer term implications’

Professional Adviser
clock 20 November 2024 • 1 min read
Bank of England holds rates at 5.25% in final pre-election decision

Bank of England holds rates at 5.25% in final pre-election decision

'The MPC would not want to be perceived as politicking'

Cristian Angeloni
clock 20 June 2024 • 1 min read
Inflation officially back to Bank of England's target level of 2%

Inflation officially back to Bank of England's target level of 2%

Data shows a 2% year-on-year fall ‘in line with consensus expectations’

Hope Coumbe
clock 19 June 2024 • 2 min read