The Supply of Capital Market Returns

Diermeier, Jeffrey J.; Ibbotson, Roger G.; Siegel, Laurence B.

doi:10.2469/faj.v40.n2.74

Cited by 34 publications

(19 citation statements)

References 1 publication

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“…Based on the supply of stock market returns hypothesis ( Diermier, Ibbotson, & Siegel, 1984 ; Ibbotson & Chen, 2003 ), we argue that businesses' productivity determines the stock market return. Since countries worldwide have instituted lockdowns and stay-at-home orders, the COVID-19 outbreak brought significant global disruptions to real economic activities, such as supply chains, productions, and consumptions ( Eichenbaum, Rebelo, & Trabandt, 2020 ; McKibbin & Fernando, 2020 ).…”

Section: Introductionmentioning

confidence: 99%

How do equity markets react to COVID-19? Evidence from emerging and developed countries

Harjoto

Rossi

Lee

et al. 2021

Journal of Economics and Business

140

101

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Section: Introductionmentioning

confidence: 99%

How do equity markets react to COVID-19? Evidence from emerging and developed countries

Harjoto

Rossi

Lee

et al. 2021

Journal of Economics and Business

140

101

View full text Add to dashboard Cite

“…This indicates a major difference between the UK and US capital structures (Grissom et al, 2009 However, not all commentators suggest the use of bonds as the proxy for the risk free rate. Diermier et al (1984) employ a risk free rate based on the average of LIBOR which is a common benchmark that fits investor requirements in the US and UK markets, given LIBOR's global application. They note that alternative measures such as the three-month T-bills for the US and the UK intra-bank interest rate were tested as proxies, but neither offered any significant statistical nor theoretical advantages.…”

Section: Duration Of Uk Giltsmentioning

confidence: 99%

The risk free rate of return in UK property pricing

Hutchison

Fraser

Adair

et al. 2011

Journal of European Real Estate Research

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Purpose -The aim of this paper is to consider the appropriate benchmark risk free rate suitable for pricing of property investments in the UK and, in doing so, investigate the financial characteristics and performance of the UK gilt yields. European investors have been significant players in the UK commercial property market during the last decade and in order to be competitive in bidding situations with UK-based investors, require to be aware of the pricing criteria adopted. Design/methodology/approach -This paper analyses the stability, yield distribution and volatility of both conventional gilts and index-linked gilts with different maturities over the period 1980-2010. It considers the changing structure of the UK commercial property market and reports on a questionnaire survey of the UK property investment community, which focused on the rationale behind the selection of the appropriate risk free rate of return. Findings -The analysis suggests that ten-year index-linked gilts have been the most stable, but that if conventional gilts are preferred, then five-year nominal appear to be more stable than ten-year nominal; ten-year real yields are smoother and relatively less volatile. In the authors' survey of the UK property investment fund managers and their advisors, the majority, but by no means all of the respondents, used the ten-year nominal gilt yield as their risk free rate of return. However, questions were raised as to whether it was appropriate to use spot or average gilt yields, particularly when rates in 2009/2010 had fallen to such low level. Originality/value -The findings provide a better understanding of how the different maturities of gilts behave. Insight is given on the criteria adopted by investors when selecting the risk free rate.

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“…In a paper I wrote with Larry Siegel and Roger Ibbotson (Diermeier, Ibbotson, and Siegel 1984) that builds on Irving Fisher's notion of the real rate of interest, we noted that long-term real returns, all other things being equal, are governed by the ability of the real economy to produce goods and services. Thus, on a long-term basis (if some equilibrium assumptions hold), 3-4 percent real global economic growth translates into an after-tax rate of return of 3-4 percent that the global capital markets can generate.…”

Section: Economic Realities and Unreasonable Costsmentioning

confidence: 99%

The Future of Life-Cycle Saving and Investing, Second Edition

2008

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David Blitzstein, as special assistant for multiemployer plans for the United Food and Commercial Workers International Union (UFCW), currently serves as a trustee for five Taft-Hartley pension funds and two health funds representing one-quarter of a million plan participants. In addition, he advises the UFCW international leadership on employee benefit policy issues. Between 1990 and 2006, Mr. Blitzstein served as the director of the negotiated benefits department of the UFCW and was responsible for providing collective bargaining advice on health insurance and pension issues. He represents the UFCW as a member of the steering committee of the National Coordinating Committee for Multiemployer Plans (a lobbying group for multiemployer plans), a member of the Employee Benefits Research Institute, a member of the National Academy of Social Insurance, and a director of the Pension Research Council of the Wharton School of the University of Pennsylvania. Mr. Blitzstein is a graduate of the University of Pennsylvania and holds a master of science in labor studies from the University of Massachusetts in Amherst. Zvi Bodie is Norman and Adele Barron Professor of Management at Boston University's School of Management. Professor Bodie has served on the finance faculty of the Harvard Business School and the Massachusetts Institute of Technology (MIT) Sloan School of Management. He has published widely on pension finance and investment strategy in leading professional journals. His books include

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The Supply of Capital Market Returns

Cited by 34 publications

References 1 publication

How do equity markets react to COVID-19? Evidence from emerging and developed countries

How do equity markets react to COVID-19? Evidence from emerging and developed countries

The risk free rate of return in UK property pricing

The Future of Life-Cycle Saving and Investing, Second Edition

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