Stock Returns for Dummies

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December 2001, Dean Baker

This paper points out that there is no way to assess the credibility of proposals to invest Social Security money in the stock market without knowing advocates’ projections for long-term stock market returns. Stock returns have only two parts, dividends and capital gains. By definition, the return on stock must be equal to the sum of these two components, which can be derived from profit-growth projections.

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