Access the full text.
Sign up today, get DeepDyve free for 14 days.
E. Dimson, P. Marsh, M. Staunton (2009)
Triumph of the Optimists
M. Boskin (1996)
Toward a More Accurate Measure of the Cost of Living
E. Dimson, P. Marsh, M. Staunton (2002)
Triumph of the Optimists: 101 Years of Global Investment Returns Princeton
Owen Lamont (1996)
Earnings and Expected ReturnsSPGMI: Compustat Fundamentals (Topic)
Alwyn Young (1994)
The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth ExperienceNBER Working Paper Series
Niki Saabye (2003)
The Equity Risk Premium
Fama Fama, French French (2002)
The Equity PremiumJournal of Finance, 57
A. Maddison (1995)
Monitoring the world economy, 1820-1992
(2012)
Krugman, Paul, 1994, The myth of Asia’s economic miracle, Foreign Affairs 73, 62-78
(1981)
Do stock prices move too much to be justified by subsequent changes
Email: cs-journals@wiley.com; Tel: +65 6511 8000. Japan: For Japanese speaking support, Email: cs-japan@wiley
Young Young (1995)
The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth ExperienceQuarterly Journal of Economics, 110
P. Krugman (1994)
The Myth of Asia's MiracleForeign Affairs, 73
Ritter Ritter (2005)
Economic Growth and Equity ReturnsPacific-Basin Finance Journal, 13
R. Arnott, Clifford Asness (2003)
Surprise! Higher Dividends = Higher Earnings GrowthFinancial Analysts Journal, 59
J. Ritter (2004)
Economic Growth and Equity ReturnsCapital Markets: Asset Pricing & Valuation eJournal
E. Dimson, P. Marsh, M. Staunton (2003)
Global Evidence on the Equity Risk PremiumFEN: Behavioral Finance (Topic)
(2011)
Commercial subscription prices for 2012 are: Print & Online: US$647 (US)
Yuewu Xu, Haitao Li (2002)
Survival Bias and the Equity Premium PuzzleCapital Markets eJournal
Zhi Da, R. Jagannathan, Jianfeng Shen (2012)
Building Castles in the Air: Evidence from Industry IPO WavesSPGMI: Compustat Fundamentals (Topic)
Krugman Krugman (1994)
The Myth of Asia's Economic MiracleForeign Affairs, 73
(2011)
For Finland and New Zealand, tradingeconomics.com is the source of the 2011
J. Campbell, R. Shiller (2001)
Valuation Ratios and the Long-Run Stock Market Outlook: An UpdateJournal of Financial Abstracts eJournal
J. Heaton (1997)
Managerial Optimism and Corporate FinanceCorporate Law: Law & Finance
(2000)
Big cap tech stocks are a sucker bet, Wall Street Journal March 14, A14
When measured over long periods of time, the correlation of countries' inflation‐adjusted per capita GDP growth and stock returns is negative. This result holds for both developed countries (for which the correlation coefficient is –0.39 using data from 1900–2011) and emerging markets (the correlation is –0.41 over the period 1988–2011). And this means that investors would have been better off investing in countries with lower per capita GDP growth than in countries experiencing the highest growth rates. This seems surprising since economic growth is generally assumed to be good for corporate profits. In attempting to explain this finding, the author begins by noting that economic growth can be achieved through increased inputs of capital and labor, which don't necessarily benefit the stockholders of existing companies. Growth also comes from technological advances, which do not necessarily lead to higher profits since competition among firms often results in the benefits accruing to consumers and workers. What's more, it's important to recognize that growth has both an expected and an unexpected component. And one explanation for the negative correlation between growth and stock returns is the tendency for investors to overpay for expected growth. But there is another—and in the author's view, a more important—part of the explanation. Along with the negative correlation between long‐run average stock returns and per capita growth rates, the author also reports a strong positive association between (per share) dividend growth rates and overall stock returns. Such an association is not surprising since unusual growth in dividends is a fairly reliable predictor of increases in future earnings. But another effect at work here is the role of dividends—and, in the U.S., stock repurchases too—in limiting what might be called the corporate “overinvestment problem,” the natural tendency of corporate managers to pursue growth, if necessary at the expense of profitability. One of the main messages of this article is that corporate growth adds value only when companies reinvest their earnings in projects that are expected to earn at least their cost of capital—while at the same time committing to return excess cash and capital to their shareholders through dividends and stock buybacks.
Journal of Applied Corporate Finance – Wiley
Published: Sep 1, 2012
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.