Modeling Returns and the Basis

日期:2016/05/06

Someone should make a study of what the returns to stocks were by quarter and year when the basis between current price and expected price 1 year later is at various levels. This is somewhat similar to looking at returns versus the earnings price less interest rate. To normalize things, I would suggest a normalized dividend yields of 1/3 of the earnings price ratio, although this could vary. When the normalized dividend yield was above the 10 year rate, one would assume that the futures were below the current level as they are today taking account of the formula future one year price = current price x 1 + div yield - interest rate a query. How could stocks give a 40,000 fold return per century if they went down too much when futures below the current level?, ie. a forecast that stock prices would decline. Much missing from these thoughts but it seems salient.