Author
Robert D. Arnott
Bio: Robert D. Arnott is an academic researcher from University of California. The author has contributed to research in topics: Portfolio & Asset allocation. The author has an hindex of 29, co-authored 129 publications receiving 2527 citations.
Topics: Portfolio, Asset allocation, Valuation (finance), Dividend, Growth stock
Papers published on a yearly basis
Papers
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TL;DR: In this article, the authors investigate whether dividend policy, as observed in the payout ratio of the U.S. equity market portfolio, forecasts future aggregate earnings growth, and they find that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratio are low.
Abstract: We investigate whether dividend policy, as observed in the payout ratio of the U.S. equity market portfolio, forecasts future aggregate earnings growth. The historical evidence strongly suggests that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratios are low. This relationship is not subsumed by other factors, such as simple mean reversion in earnings. Our evidence thus contradicts the views of many who believe that substantial reinvestment of retained earnings will fuel faster future earnings growth. Rather, it is consistent with anecdotal tales about managers signaling their earnings expectations through dividends or engaging, at times, in inefficient empire building. Our findings offer a challenge to market observers who see the low dividend payouts of recent times as a sign of strong future earnings to come.
244 citations
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TL;DR: In this paper, the authors present an estimate of the objective forward-looking U.S. equity risk premium relative to bonds through history, specifically since 1802, and demonstrate that the long-term forwardlooking risk premium is nowhere near the level of the past; today, it may well be near zero, perhaps even negative.
Abstract: The goal of this article is an estimate of the objective forward-looking U.S. equity risk premium relative to bonds through history—specifically, since 1802. For correct evaluation, such a complex topic requires several careful steps: To gauge the risk premium for stocks relative to bonds, we need an expected real stock return and an expected real bond return. To gauge the expected real bond return, we need both bond yields and an estimate of expected inflation through history. To gauge the expected real stock return, we need both stock dividend yields and an estimate of expected real dividend growth. Accordingly, we go through each of these steps. We demonstrate that the long-term forward-looking risk premium is nowhere near the level of the past; today, it may well be near zero, perhaps even negative.
220 citations
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TL;DR: In this article, a total differential approach to equity duration is presented, which is a total differential approach to calculate the duration of an investment in the stock market, with a focus on stock market volatility.
Abstract: (1989). A Total Differential Approach to Equity Duration. Financial Analysts Journal: Vol. 45, No. 5, pp. 30-37.
93 citations
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86 citations
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TL;DR: In this article, the authors argue that most of the institutional investing community is expecting far higher returns than are realistic from current market levels, and they find that it is remarkably difficult to make a case for a positive equity risk premium (the premium of future stock market returns relative to bond yields).
Abstract: The authors contend that most of the institutional investing community is expecting far higher returns than are realistic from current market levels. Extrapolating the past is the easiest, and worst, way to forecast the future. Unfortunately, most investors9 return expectations are shaped by a simple extrapolation of either recent or long–term past returns. If, instead, the constituent parts of equity market returns are examined, we find that it is remarkably difficult to make a case for a positive equity risk premium (the premium of future stock market returns relative to bond yields) from current market levels. None of this analysis is contingent on any assumption that market P/E ratios or dividend yields should return to historical levels. If market levels are fair and are fully sustained in the years ahead, there is still little or no room for a positive equity risk premium. If there is not a positive risk premium, then actuarial return assumptions are likely to be too optimistic, with far–reaching implications for pension funding ratios, corporate earnings, future pension contributions, and appropriate asset allocation policy.
83 citations
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1,324 citations
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TL;DR: In this paper, the average annualized excess retraction of a long-only investment in commodity futures is estimated, and the performance of the futures market has been analyzed in terms of their expected performance.
Abstract: Investors face numerous challenges when seeking to estimate the prospective performance of a longonly investment in commodity futures. For instance, historically, the average annualized excess retu...
823 citations
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TL;DR: This corpus of literature is analyzed by using the co-word bibliometric methodology to assess the state- of-the-art in this research area and suggest suggestions for future research.
Abstract: Neural networks are used in business organizations for providing intelligent decision support. The ABI/Inform bibliographic database has over 1 000 publications on business-related research in neur...
675 citations