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The current consensus economic model, the neoclassical synthesis, depends on aprioristic assumptions that are shown to be invalid when tested against the data and fails to include finance. Economic policy based on this consensus has led to the financial crisis of 2008, the 'Great Recession' that followed, and the slow subsequent rate of growth. In The Economics of the Stock Market, Andrew Smithers proposes a model that is robust when tested, and by including the impact of the stock market on the economy, overcomes both these defects. The faults of the current consensus model are shown to result typically from an unscientific methodology in which assumptions are held to be valid despite their incompatibility with data evidence. Smithers demonstrates examples of these faults: the Miller/Modigliani Theorem (the assumption that leverage does not affect the value of produced capital assets); the assumption that short-term and long-term interest rates, and the cost of equity capital, are co-determined; and the assumption that the decisions of corporate managements aim to maximise the present value of corporate assets ('profit maximisation') rather than the value determined by the stock market. The Economics of the Stock Market proposes a model that includes and explains the stationarity of real returns on equity, based on the interaction of the differing utility preferences of the managers of companies and the owners of financial capital. These claims are highly controversial, and Smithers proposes that the relative merits of the neoclassical synthesis and this proposed alternative can only be properly considered through public debate.
Produktinformation
Utgivningsdatum2022-03-22
Mått163 x 238 x 18 mm
Vikt472 g
FormatInbunden
SpråkEngelska
Antal sidor216
FörlagOUP OXFORD
ISBN9780192847096
UtmärkelserIncluded in the Financial Times Best Books of 2022: Economics
Andrew Smithers is founder and director of economic consultancy Smithers & Co. He is the author of The Road to Recovery: How and Why Economic Policy Must Change (Wiley, 2013), and Productivity and the Bonus Culture (OUP, 2018).
Foreword by Andy Haldane1: Introduction2: Surprising Features of the Model3: The Model in Summary4: Management Behaviour, Investment, Debt, and Pay-out Ratios5: Corporate Leverage and Household Portfolio Preference6: The Growth of Corporate Equity7: The Yield Curve8: The Risk-Free Short-term Rate of Interest9: Equity, Bond, and Cash Relative Returns10: Stock Market Returns Do Not Follow a Random Walk11: The Risks of Equities at Different Time Horizons12: The Time Horizon at Which Investors Will Prefer Equities to Bonds13: Changes in Aggregate Risk Aversion14: Monetary Policy, Leverage, and Portfolio Preferences15: Valuing the US Stock Market16: The Real Return on Equity Capital Worldwide17: Money and Time Weighted Returns18: The Behaviour of The Firm19: Corporate Investment and the Miller-Modigliani Theorem20: Land, Inventories, and Trade Credit21: How the Market Returns to Fair Value22: Fluctuations in the Hurdle Rate23: Tangibles and Intangibles24: Other Problems from Labelling IP Expenditure as Investment25: Inflation, Leverage, Growth, and Financial Stability.26: Tax27: Portfolio Preference and Retirement Savings28: Life Cycle Savings Hypothesis (LCSH)29: Depreciation, Capital Consumption, and Maintenance30: Comparison with Other Approaches31: The Efficient Market Hypothesis32: Summary33: Comments in ConclusionAppendicesAppendix 1. The Duration of Bonds and EquitiesAppendix 2. The Valuation of Unquoted Companies in The Financial Accounts of the United States - Z1Appendix 3. Measurement of the Net Capital Stock and Depreciation in the USAppendix 4. Data Sources, Use, and Methods of Calculation
Smithers was one of the few economists to warn about the internet bubble and the dangers posed by the ensuing global credit boom. His current concerns shouldn't be dismissed lightly.
