When is an “event” priced in? I mean should an expectation that interest rates will go down be already priced in, why should there be a change in price when it actually occurs?
an event can never be fully priced in until it occurs. there will always be a major contrarian or at least a few minor contrarians, or even just a few people who don’t care and are focused on something else. back when rate decisions were less “certain” the implied probability of different outcomes were often similar. now there is a 99% chance of no rate changes. if rates did go up, all markets would freak out. everytime the rate isn’t increased, there will be an unnoticable and unidentifiable effect in markets that we could see if we were able to notice and comprehend all. the conclusion, nothing is ever fully priced in ever. we aren’t robots… yet, and we will always have differing opinions. anyone who ever says that something is fully ‘priced in’ is not worth listening to. http://www.clevelandfed.org/Research/data/Fedfunds/index.cfm
JOE2010 Wrote: ------------------------------------------------------- > When is an “event” priced in? > > I mean should an expectation that interest rates > will go down be already priced in, why should > there be a change in price when it actually > occurs? Sounds like you need to do the MBA.