Economic Growth and Equity Investing
California Institute of Technology
February 16, 2010
Financial Analysts Journal, Vol. 66, No. 1, 2010
The performance of equity investments is inextricably linked to economic growth. Nonetheless, few studies on investing have explicitly taken research on economic growth into account. This study bridges that gap by examining the implications for equity investing of both theoretical models and empirical results from growth theory. The study concludes that over the long run, investors should anticipate real returns on common stock to average no more than about 4 percent.
Keywords: Relationship of Economic Activity to the Investment Process, Equity Investments, Fundamental Analysis and Valuation Models
Date posted: February 18, 2010