From: John Conover <email@example.com>
Subject: Re: GDP growth versus Stock market growth: I don't get it.
Date: 17 Aug 2001 02:07:11 GMT
For the DJIA, 1900-01-02 to 2001-04-06, the gain in value per year was 1.046584162621. For the S&P500, 1928-01-03 to 2001-04-06, the gain in value per year was 1.05547419935. For the NASDAQ, 1984-10-11 to 2001-04-06, the gain in value per year was 1.12583350673. For the NYSE COMPOSITE, 1966-01-03 to 2000-12-29, the gain in value per year was 1.07690672044. For the USGDP, 1940-01-01 to 1995-12-31, the gain in value per year was 1.08114163318. None of which are adjusted for inflation. For the DEFLATION, 1940-01-01 to 1995-12-31, the gain in value per year was 1.04489629014. John BTW, LSMF on the data. Equity indice data was from the exchanges-daily close. USGDP and DEFLATION-annual data from the FED. Indice data available from http://finance.yahoo.com/. FED USGDP and DEFLATION data available from 1996 US Federal budget, gopher://sunny.stat-usa.gov:70/11/BudgetFY96 and 1997 US Federal budget, http://www.doc.gov/BudgetFY97/index.html. Statistical estimates, confidence: DJIA: 99.2819% S&P500: 99.1223% NASDAQ: 98.2448% NYSE COMPOSITE: 98.7234% USGDP: 85.4791% DEFLATION: 0.854791 which says don't put a lot of confidence in 60 years of annual data. C sources to programs used available at: http://www.johncon.com/ndustrix/utilities.html and: http://www.johncon.com/ntropix/ for the tsshannoneffective program, (which was used with the -e argument,) for the confidence levels. Dez Akin writes: > I asked a friend of mine that was taking some econ classes this. He > still hasn't given me a satisfactory answer. > > So whats the real economic growth rate on average for the US economy? > Like 3% or something over the past 100 years? > > And the growth rate on stock capitalization has been like 7% in real > return over inflation right? > > Does this make anyone nervous? So whats going on here? Are the P/E > ratios getting more and more inflated on average, or is corporate > america growing much faster than the rest of the economy? > > I mean how much of the economy is represented by the stock market? > > Won't you eventually hit a wall if your p/e multiples are held > constant where the return on stock investment can't grow faster than > the economy if stocks swallow up the entire economy? -- John Conover, firstname.lastname@example.org, http://www.johncon.com/