Numerous and complex factors can influence bond portfolio returns. In this era, interest rates were relatively stable, so one could gain little from the active management of bond portfolios. The environment in the bond market changed considerably in the late s and especially in the s when interest rates increased dramatically and became more volatile.
This created an incentive to trade bonds, and this trend toward more active management led to substantially more dispersed performance by bond portfolio managers. This dispersion in performance in turn created a demand for techniques that would help investors evaluate the performance of bond portfolio managers. This change created an incentive to trade bonds, and this trend toward active management led to more dispersed performance by bond portfolio managers.
The evaluation models for bonds typically consider the overall market factors and the impact of individual bond selection. This technique for measuring trading effect breaks down the return based on the duration as a comprehensive risk measure. But it not consider differences in the risk of default. This could clearly affect the performance. A portfolio manager that invested in Baa bonds, for example, could experience a very positive analysis effect simply because the bonds were lower quality than the average quality.
What is 'Trading Effect' Trading effect is the measure of performance that examines the difference in returns between a bond portfolio and a chosen benchmark. Understand the basics of corporate bonds to increase your chances of positive returns.
Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators. Many emerging Asian economies have high savings and low consumption rates. We look at how this impacts their economic development. The difference between developed and developing countries, along with a list of the status of 25 nations around the world. Why is being trade-dependent a problem for these countries, and how does that affect investors?
In theory, Purchasing Power Parity stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac.
Find out about the factors that affect a country's overall balance of trade and how it is used as an economic indicator. Learn what is a trade deficit is, also known as net exports, and what effect they have on the stock market.
Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage Learn about the rapid economic growth China has experienced in recent years and how the country grew into the world's largest Discover how the price of oil affects the Russian economy.
As a net exporter of oil, Russia depends on robust oil prices
Effect of an appreciation on the terms of trade. An appreciation will make imports cheaper. But, exports will become more competitive. Therefore, after an appreciation, you would expect to see an improvement in the terms of trade. Factors that affect the terms of trade. Exchange rate. A fall in the exchange rate should reduce the terms of trade.
Foreign trade enables a nation to consume a different mix of goods and services than it produces, so to measure real gross domestic income (GDI) for an open economy, we must deflate by an index of the prices of the things that this income is used to buy, not the price index for GDP.
Terms-of-Trade Effect Determines the effect of a change in the world price of a commodity on the value of a country's exports and imports as a . Factors Affecting Terms of Trade. A variety of factors affect the TOT, and some are unique to specific sectors and industries. Scarcity, or the amount of goods available for trade, is one factor influencing the TOT.
The terms of trade may be influenced by the exchange rate because a rise in the value of a country's currency lowers the domestic prices of its imports but may not directly affect the prices of the commodities it exports. Terms of Trade: Concepts, Determination and Effect of Tariff on Term of Trade! Gains from Trade and Terms of Trade: How the gain from international trade would be shared by the participating countries depends upon the terms of trade.