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In-Depth Understanding of the Fisher Model in the Financial Market

In: Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024)

Author

Listed:
  • Yichen Gu

    (Xidian University, School of Economics and Management)

Abstract

In the early 20th century, economics and finance transitioned from qualitative assessment to mathematical modelling, as Irving Fisher’s 1930 model demonstrated. This model provided a crucial framework for comprehending consumption, savings, and investment behaviour amid uncertainty. With the increasing complexity of financial markets, the Fisher model became an essential tool for investors and analysts in asset pricing, risk management, and optimal decision-making. Furthermore, Fisher’s separation theorem was pivotal in guiding corporate investment decisions within corporate finance. Policymakers also found value in the model’s capacity to evaluate the effects of economic policies on consumption and investment, thereby contributing to the advancement of modern economic and financial theories. The research first set up a mathematical model in the perfect competition capital market to explore the Fisher model in the financial market. In addition, the research finally launched an in-depth discussion of the Fisher model and expanded the limitations of its application. Finally, the Central Insights and Potential limitations of the Fisher Model are summarised.

Suggested Citation

  • Yichen Gu, 2025. "In-Depth Understanding of the Fisher Model in the Financial Market," Advances in Economics, Business and Management Research, in: Junfeng Lu (ed.), Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024), pages 317-328, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-652-9_32
    DOI: 10.2991/978-94-6463-652-9_32
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