This note presents a simple model that nests the excess liquidity and savings glut hypotheses of the debate on the recent asset price boom. It clarifies the notion of investors' search for yield and shows how financial frictions influence asset price dynamics

We study the two-way interaction between central banks and financial markets using a beauty contest framework. The analysis identifies when asset prices reveal useful information about fundamentals and when they reflect back the central bank's pronouncements. In equilibrium, the central bank is...