RBA paper quantifies risk of pricing distortions in markets

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A Reserve Bank of Australia paper published on December 23 says the effects of equity market mispricing on household and firm decisions are often overstated.

James Hansen, the paper's author, proposes a new method for identifying the effects of equity market mispricing on household and firm decisions. The key assumptions used are that mispricing shocks only have transitory effects on the economy, and that observable data exists that is correlated with these shocks, but is not correlated with

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