The stock market crash - and after

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Monograph

Identifikator:: 1815583320

URN:: urn:nbn:de:zbw-retromon-204544

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The stock market crash - and after

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1930

Scope:: XXVI, 286 S.; graph. Darst

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter V. Plowed-back earnings

Collection:: Economics Books

Plowed-Back Earnings 67 annual rate plowed-back for the six years—ig2a- 1927, inclusive, was over 9 per cent per annum; in fact, if the dividends to start with were half the earn- ings, the earnings plowed-back amounted to 11.2 per cent. Edgar L. Smith, in his book Common Stocks as Long Term Investments, made a study of the stock market, in which he found a material increase in prices of common stocks of between 2 to 3 per cent per annum on the average, and sometimes a far greater increase. He inferred that this must be mainly due to plowing-back. Why Stocks Rise Faster Than Earnings The report on Recent Economic Changes includes the record of an advance in the prices of industrial stocks, 1922-1927, at a rate of 14.1 per cent a year, which for that period exceeds the rate of gain in dividend payments and of increase in profits. Yet an important element in the increase in the level of common stock prices was undoubtedly this increased rate at which profits were achieved and plowed-back into industrial undertakings. The percentage in- crease in prices of stocks should be equal to the per- centage increase in earnings per share if the ratio of price to earnings were to remain constant. For common stock this would be faster than the total profits of the company, which were 9 per cent. As the rate of return on preferred stocks, being fixed by contract, cannot increase during prosperity, their share of it is absorbed by the equity shares, which

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