If this is indeed part of the puzzle, then financial innovations such as credit derivatives may, again, all else being equal, reduce long-run average risk premiums in both the equity and credit markets, over time, by facilitating risk sharing among currently active market participants, provided that participants adequately understand and manage the risk of these products.
That said, time will tell whether my speculations on this point are correct. Conclusion My message to you today has been that the Federal Reserve places a lot of emphasis on understanding financial asset prices to help it meet its public policy objectives.