Text extracted via OCR from the original document. May contain errors from the scanning process.
Global Financial Data reports annual rate of return, growth rate in market cap, and
“imputed dividend rate” as the difference. Dividend rate itself is reported as
something a little different. | made no attempt to get to the bottom of this distinction,
just as | made none to allow for editorial bias in the Piketty-Zucman website. I chose
the imputed version for logical consistency.
This direct information obviates the chain of reasoning from (4.2) to (4.5), and
allows me to jump to the latter. “Productivity gain” in (4.5) is simply annual change
in reported rate of return. Acceleration is annual change in reported market cap
growth rate. (4.6a) defines the free growth index as their ratio. @(SM), the green
line, tracks it in the charts. It too fluctuates around the number one. Gains in
dividend rate have coincided as often with gains in market cap growth rate as with
drops.
This seems only to expound what everyone knows. Of course firms are likelier to
raise dividends in years of growth, and cut them in years of decline. I never claimed
that free growth theory does more than state the obvious. What is made obvious by
the data is that a change in total return is the prime mover enabling market cap and
dividend rate to accelerate or decelerate as a pair. What is made obviously wrong
would be a thrift theory casting dividend restraint as the prime mover. Were that so,
market cap acceleration would coincide with lower rather than higher dividend
rates.
This pretty much completes my evidence for free growth theory. | have not found
other promising data sources. One is tantalizingly close to hand. There is not much
reason why corporate bond history is less transparent to the world than corporate
stock history. A qualified expert might reconstruct market caps of both, side by side,
to show a picture of the whole corporate sector. Surely I am not the only person who
would take interest. What is the history of leverage, and of total return, and its
growth and yield components, to debt and equity claims cap-weighted together?
Chapter 4 Mill’s Idea 1/11/16 22
HOUSE_OVERSIGHT_011013