It should have stated: "Cardiff council subsidised the venture using what it described as an 'invest to save loan' - a term used by local authorities for paying for something with an expected future return
from one internal account to another."
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 this paper, I address the relative importance of these mechanisms by using Campbell and Shiller's (1988) method to decompose excess stock market return, [e.sub.M,t], into three parts: expected return, [E.sub.t-1][e.sub.m,t]; a shock to the expected future return
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.S.
He demonstrates that the P/E ratio indicates future growth in earnings which is positively related to expected future return
on equity and negatively related to current return on equity.
When past returns are high, expected future returns
are on average higher than realizations.
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
. The author demonstrates how the predictive ability of unexpected volatility can be utilized in dynamic asset allocation strategies that deliver a substantial improvement in risk-adjusted performance as compared to traditional buy-and-hold strategies.
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.'
"The cost of capital is the link that equates expected future returns
during the life of the investment with the present value of the investment at a given date.
Since firms go bankrupt typically due to inability to pay debt, the major factor in determining whether a firm will go bankrupt is the availability of cash, while expected future returns
should not have a significant effect on the probability of bankruptcy.