If so, one might expect that it also encodes the current value of the asset pool a quantity that signals the likely total reward that will be received at the end of the block.
It will shed light on the reality that Wall Street makes a lot of money by creating paper claims to assets in quantities that exceed the underlying assets (e.g., the Dole Food case, in which brokerage statements showed people owned 49.2 million shares but only 36.7 million shares were outstanding and this is far from unique).
Standard portfolio theory, embodied in the mean-variance expected utility model, predicts that households will always hold part of their portfolio in risky assets, the exact quantity being a function of the equity premium and the volatility of the risky assets' portfolio (see Markowitz 1952; Tobin 1958).
In the example above, the asset is a specified quantity of grain.
The new money swells the size of bank reserves in the economy by the quantity of assets purchased hence "quantitative" easing.
The centerpiece of this is the so-called liquidity coverage ratio, which tests the quantity of assets a lender holds to withstand 30 days of investors pulling money in a stress situation partly modeled on the financial crisis.
Mr Irwin suggests that Fed officials may like the policy because the announcement of a specific interest rate target may lead market to quickly converge on that rate, reducing the quantity of assets the Fed needs to buy.
In such an environment, the quantity of assets in the hands of the private sector affects the return (typically by lowering the term premium) and some forms of market segmentation induce changes in consumption and investment behaviour.The direct evidence in support of QE is mixed, and the estimated magnitudes of its effects rather uncertain.
Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.
The Fed and its peers are creating piles of money that could be put in and taken out of different assets in disruptive quantities and at dizzying speeds.
