Report
Why is the return on equity not falling in OECD countries?
In OECD countries, companies’ return on equity (RoE) is significantly higher than the yield on risk-free government bonds. This gap between the RoE and the risk-free interest rate is not narrowing. The high level of the RoE is explained in particular by the skewing of income distribution to the detriment of wage earners . B ut this does not explain why the gap between the RoE and the risk-free interest rate is not narrowing. The only possible explanation is probably that corporate investment has barely react ed to the low interest rates, and therefore that the low interest rates are not driving down the marginal productivity of capital since they are not leading to an increase in investment. But this explanation does not tally with the facts: investment respond s strongly to fall s in the real interest rate. It must be conceded that the RoE is withstanding the rise in capital intensity.
Provider
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
Other Reports from Natixis
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.