Economic Growth and Equity Returns

By Jay R. Ritter. 2005

157 citations recorded by the source corpus.

It is widely believed that economic growth is good for stockholders. However, the cross-country correlation of real stock returns and per capita GDP growth over 1900–2002 is negative. Economic growth occurs from high personal savings rates and increased labor force participation, and from technological change. If increases in capital and labor inputs go into new corporations, these do not boost the present value of dividends on existing corporations. Technological change does not increase profits unless firms have lasting monopolies, a condition that rarely occurs. Countries with high growth potential do not offer good equity investment opportunities unless valuations are low.

View Paper: https://www.semanticscholar.org/paper/336dc98dad4182ccea31b7e4b867be65a8381ee2

Citations in the corpus

• The Worldwide Equity Premium: A Smaller Puzzle (2006, unknown): “Over the long run, real returns accrued largely from dividend payments, but Dimson, Marsh and Staunton (2000, 2002), Arnott and Ryan (2001), and Ritter (2005) highlight the time-series and cross-sectional variation of global equity premiums.”