Report
Is the sharp rise in stock market indices due to an increase in shareholder remuneration?
The sharp rise in stock market indices may come as a surprise, at a time when real long-term interest rates have risen sharply and geopolitical and economic risk is high. We seek to determine whether this may be due to the fact that shareholder remuneration (dividends and share buybacks) has increased at the expense of investments in productive capital. This effect of rising shareholder remuneration on stock market indices may be due either to shareholders' short-sightedness and strong preference for the present, or to the prospect of relatively low returns on corporate projects, or, mechanically, to the effect of share buybacks on earnings per share. We find that there is no correlation between shareholder remuneration and the stock market index (S&P) in the United States, but on the contrary there is a significant correlation between shareholder remuneration and the Euro Stoxx index in the euro zone.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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