Barron's Confidence Index uses the
A) yields on high-quality stocks
B) difference in yields on stocks and bonds
C) difference in yields between high- and low-quality bonds
D) difference in yields between high- and low-quality stocks

Question

Quizplus · Accepted Answer

The Barron's Confidence Index uses the difference in yields between high- and low-quality bonds as an indicator of investor confidence. This is because investors tend to demand higher yields on lower quality bonds when they are less confident about the economy, and therefore more risk-averse. Conversely, when investors are more confident, they may be willing to accept lower yields on higher quality bonds, as they perceive them to be safer investments. As such, the Barron's Confidence Index can be a useful tool for assessing the overall mood of the investment community.

Barron's Confidence Index Uses the