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The Speed

Paper:ewp-fin/0307001
From:    
Date: Wed, 2 Jul 2003 06:34:02 -0500
Date (revised): Mon, 7 Jul 2003 04:35:34 -0500

Title: The Speed
Author: Dmitry Baryshevsky (Belarus Builder's Union, Minsk, Belarus)
Contact:
Comments: Type of Document - MS Word; prepared on IBM PC; to print on PostScript; pages: 12 ; figures: included
Keywords: long-term earnings growth rate, equity market, earnings multiple cyclic behavior, earnings variability, CPI variability, P/E variability premium
JEL: G
EWPA-references:
Report-no: DB-2-07-02-2003

Abstract:

The speed is one of the most important factors in development of any dynamic system. It is shown that since the end of the 19-th up to the middle of the 20-th centuries the average growth rate of earnings, dividends and S&P 500 index was 1.5% per year. In the second half of the 20-th century the average growth rate of dividend speed up to 5%, earnings up to 5.5% and S&P 500 up to 8% per year. The arisen divergence in the growth rate of earnings and S&P500 led to the essential growth of the earnings multiple P/E. At the same time, from the beginning of 70- th, the 10 year earnings variability has grown, practically, 3 times. Such situation can result in development of long-term stagnate sideways movement.

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