The Feedback Effect: How the Financial Markets Affect Decisions in the ‘Real Economy’ – Knowledge@Australian School of Business

Small business need-to-know.  The study shows why measurements at different times have different weight and how to really use the information for specific purpose

Excerpt: … there is much more to it than that, according to a new study by two Wharton faculty members and one former one. Their paper, “The Real Effects of Financial Markets,” explores the subtle relationships between the share price, the company’s health, and decisions made by its executives and other players, such as lenders, investors, customers, directors, employees and regulators. The study, a survey of research on the topic, finds that the financial markets, where stocks, bonds and other securities are traded, serve a critical “informational role” that affects decisions in the “real economy” composed of companies.

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