Showing posts from March, 2021

Revisit: How interest rate affects the market - a mathematical courtship

[First published on 13/10/2018] What would happen when the banks increase their interest rate? Here's a simplified theoretical summary of the relationship between interest rate and securities. When interest rate rises, people will start to park more of their money in the bank and government bonds (which is assumed to be risk-free). Therefore stocks or higher risk instrument prices will start to  decline . However, in view of economic recovery, it will take some time before a bear market sets in? That is also what we are seeing in 2021, as growth stocks lose their shine given their high valuations. REITS might be adversely affected due to the increase in their debt's interest (so they either have a higher sum to repay as a result or may cut down on borrowing for


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