Wednesday, January 05, 2005

Brad DeLong's: Equity Returns in the Future

Equity Returns in the Future

This is a detailed discussion about the prospect for equity returns in coming years. This links in with a second post by Brad about equity returns.

Equity Returns in the Future II: "Well, the upshot is that the 3-4% annual expected equity premium return that I see still seems very large to me: to correspond to the preferences of a 62-year-old male expecting to spend his wealth in the next fifteen years or to the preferences of a money manager for whom reporting a big loss in the next four years is a career-limiting move, rather than to the risk preferences of the economy considered as a frictionless social welfare maximizing machine. And this means that there is still a powerful, powerful case for stocks for patient investors with a long horizon of a quarter century or more. If you can wait a quarter century, stocks do not look like a sure thing relative to Treasury bonds, but they do look like a 90% thing."

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