That is, all else equal, the price-to-dividend ratio should be high when expected future dividend growth is high or when the expected future return
to the asset is low.
In contrast, the expected return, especially, and shocks to the expected future return
exhibit strong predictive ability for economic activities.
It seems likely that a rise in the interest rate paid on Treasuries, and perhaps an increase in equity prices and a reduction in the expected future return
on equity, would be necessary in order to induce private investors to reallocate their portfolios from equities to U.
If an asset has characteristics that investors really dislike, such as low liquidity, little name recognition, or high volatility, its price will be lower and therefore its expected future returns
will be higher, all other things being equal.
Today, expensive bond markets combined with increasingly "dear" equity valuations create a similar -- yet in some ways starker backdrop as expected future returns
on stocks and bonds fall in step.
In particular, the author shows that unexpected volatility is negatively related to expected future returns
For the UAE in particular, having an investment strategy that leads to expected future returns
seems to be a greater priority than for the rest of the world.
Our remaining equity investment in the joint venture is approximately USD24m, and we are excited about the expected future returns
to Chatham shareholders from this remaining investment.
Previous studies have documented that stock prices are moved primarily by shocks to expected future returns
, rather than by shocks to expected future cash flows.
Companies that have defined benefit plans--that is, a plan that provides a specified benefit to a participant upon retirement--require the use of estimates, most notably in the areas of expected future returns
on plan assets and expected inflation rates.
In an earlier Economic Commentary, we illustrated in some detail how declining shareholder costs affect stock prices and expected future returns
Slightly more than half of the cross-sectional variation in excess values is attributable to variation in expected future cash flows, with the remainder attributable to variation in expected future returns
and to co-variation between cash flows and returns.