Siegel's paradox

Financial phenomenon

Siegel's paradox is the phenomenon that uncertainty about future prices can theoretically push rational consumers to temporarily trade away their preferred consumption goods for non-preferred goods, as part of a plan to trade back to the preferred consumption goods after prices become clearer. For example, in some models, Americans can expect to earn more American dollars on average by investing in Euros, while Europeans can expect to earn more Euros on average by investing in American dollars. The paradox was identified by economist Jeremy Siegel in 1972.

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