Why stock prices are falling less

Behavioral economist Robert Shiller
Picture: EPA

Do the markets act rationally or irrationally? Economists see various reasons why share prices fall less than economic performance.

Dhe stock market development does not seem to match the economic and economic news since the beginning of the Corona crisis: unemployment in America grew faster than ever, short-time working in Germany peaked, companies corrected their profit expectations, governments saw the effects of billion-dollar economic stimulus packages . With the effect that the international financial markets quickly returned to the path they were on in March after a sharp drop in prices.

For the capital market researcher Richard Stehle, the development of the German stock exchange barometer Dax follows rational considerations by investors. “I took a closer look at the crisis at the end of the Second World War and other major crises,” reports the emeritus professor at Humboldt University in Berlin. At that time, large companies based in East or West Berlin quickly managed to pack their documents and create new headquarters in Munich or Frankfurt. Deutsche Bank, Siemens and Allianz then became protagonists of the economic recovery in the Federal Republic. “Small companies tend to be less flexible, while large companies usually survive better as a result of their broader scope for action,” says Stehle. This is one of the reasons why the Dax has declined less than the gross domestic product.


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