Productivity and equity returns: A century of evidence for 9 OECD countries

The share market boom in the 1990s is often linked to the acceleration in labour productivity over the same period. This paper explores the suggestions that labour productivity may be an inaccurate measure of firm’s cash flow which underlies equity valuations, and that innovations in productivity in the 1990s may have had only have temporary effects on capital productivity, the key element of the more correct measure of cash flow. Using a century of data for the OECD countries it is shown empirically that the link of productivity to share returns is indeed strongest for capital productivity, but generally the link is weaker that is sometimes maintained in the literature

Equity prices, productivity growth and the "new economy"

The increase in equity prices over the 1990s has to a large degree been attributed to permanently higher productivity growth that is derived from the ‘new economy’ and related research and development (R&D) expenditures. This paper establishes a rational expectations model of technology innovations and equity prices, which shows that under plausible assumptions, productivity advances can only have temporary effects on fundamentals of equity prices. Using data on R&D capital and fixed capital productivity for 11 OECD countries, the evidence give strong support for the model by suggesting that technology innovations indeed have only temporary effects on equity return

The price-dividend relationship in inflationary and deflationary regimes

This paper suggests that dividends do not reflect permanent earnings of corporations in periods of high inflation and deflation, and therefore the price-dividend relationship, as predicted by Gordon’s dividend-price model, breaks down. Using data for the US and the UK over the period from 1871 to 2002, nonlinear estimates support the prediction of the model

Secondary Quantum Hamiltonian Reduction

Recently, it has been shown how to perform the quantum hamiltonian reduction in the case of general $sl(2)$ embeddings into Lie (super)algebras, and in the case of general $osp(1|2)$ embeddings into Lie superalgebras. In another development it has been shown that when $H$ and $H'$ are both subalgebras of a Lie algebra $G$ with $H'\subset H$, then classically the $W(G,H)$ algebra can be obtained by performing a secondary hamiltonian reduction on $W(G,H')$. In this paper we show that the corresponding statement is true also for quantum hamiltonian reduction when the simple roots of $H'$ can be chosen as a subset of the simple roots of $H$. As an application, we show that the quantum secondary reductions provide a natural framework to study and explain the linearization of the $W$ algebras, as well as a great number of new realizations of $W$ algebras.Comment: 33 pages, LATEX. Final version, including proof of conjecture. Accepted for publication in Comm. Math. Phy

High-harmonic generation from arbitrarily oriented diatomic molecules including nuclear motion and field-free alignment

We present a theoretical model of high-harmonic generation from diatomic molecules. The theory includes effects of alignment as well as nuclear motion and is used to predict results for N$_2$, O$_2$, H$_2$ and D$_2$. The results show that the alignment dependence of high-harmonics is governed by the symmetry of the highest occupied molecular orbital and that the inclusion of the nuclear motion in the theoretical description generally reduces the intensity of the harmonic radiation. We compare our model with experimental results on N$_2$ and O$_2$, and obtain very good agreement.Comment: 12 pages, 8 figures, 2 tables; legends revised on Figs. 1,3,4,6 and

The Equity Premium

Recent research on the equity risk premium has questioned the ability of historical estimates of the risk premium to provide reliable estimates of the expected risk premium. We calculate the equity risk premium for a number of countries over longer horizons than has been attempted to date. We show that the realised US equity premium is consistent with the premia obtained elsewhere. Furthermore, using well over a century of data, we find that current estimates of the equity premia are close to those observed during the pre-1914 era. This is of particular relevance given the argument that the financial environment during that period bears a closer resemblance to today than the 1914-1945 period, and possibly also the 1945-1971 period. This points to a current equity risk premium that is considerably lower than consensus forecasts (Welch 2001)