Pension recovery performance 2020

[Deleted User]

1. If GDP changes cause index changes (as you claim), it means that the two are correlated. 

2. If index lags GDP by 2 percent, the difference being (in your words) “dilution’” it also means the two are correlated. 

3. Correlation does not have to be capitalized “LINEAR”. Can be non-linear. Not sure how it is relevant. 

4. Index = weighted market cap of free floating shares of the companies making up the index. Its the same thing. You can’t have one growing faster than the other. Market cap isn’t GDP. Not sure why you suddenly switched from correlating GDP to index. 

These are basic concepts.  

Another_Saver

Deleted_User said:

1. If GDP changes cause index changes (as you claim), it means that the two are correlated. 

2. If index lags GDP by 2 percent, the difference being (in your words) “dilution’” it also means the two are correlated. 

3. Correlation does not have to be capitalized “LINEAR”. Can be non-linear. Not sure how it is relevant. 

4. Index is weighted market cap of free floating shares of the companies making up the index. Its the same thing. You can’t have one growing faster than the other. 

These are basic concepts.  

1. Over the very, very long term, yes you can start to see a correlation (try it, just make sure to go back before 1985 as per https://voxeu.org/article/big-bang-stock-market-capitalisation-long-run). But comparing annual change figures is meaningless. You would need to at least compare decades to come up with anything meaningful, even then rerating, dilution, and expanding or contracting relative to GDP can have material effects over periods of multiple decades.
2. See 3
3. Linear correlation is different to... Geometric? I dunno I dont remember this.

4.  New IPOs, stock option exercises, new rights issues dilute existing shareholder's proportionate ownership of the total. Across most developed markets this has historically averaged out around 2% (literally every source I have referred to... I think).

How do you explain the FTSE 100 market cap growing by 7.45% since inception when the index has only grown 5.05%?

Nb I am using 31/12/85-31/12/19 figures.

Edit: https://www.google.com/url?sa=t&source=web&rct=j&url=https://site.warrington.ufl.edu/ritter/files/2015/04/Economic-growth-and-equity-returns-2005.pdf&ved=2ahUKEwjq-7XttrztAhWSbsAKHTE8A4EQFjAAegQIAhAB&usg=AOvVaw1Zw_jAH1fkqHZqiNRIosHd

TBC15

Can anyone remember what town we left the thread in?

Prism

TBC15 said:

Can anyone remember what town we left the thread in?

I would but my head is hurting too much to give you directions there..

The_Green_Hornet

TBC15 said:

Can anyone remember what town we left the thread in?

As with most threads it has ended up between a rock and a hard place.

Cus

Did we decide if they are corroborated (or whatever) or not?

TBC15

I had to put my hat on there was so much going over my head.

Another_Saver

Cus said:

Did we decide if they are corroborated (or whatever) or not?

In the short term no, in the long term yes, and they are related regardless.

Thrugelmir

itwasntme001 said:

There are a lot of companies adding value outside of the listed firms, Private equity is becoming more attractive because public equities look very expensive.

Private equity has been growing for decades.  Private equity has need of a public listing as has no requirement to raise capital. Having no public listing provides a considerable cost saving as well. With no need to provide trading updates or accord with closed share trading periods etc. Retail investors are effectively shut out of this segment of the market. With the decline in the number of listed companies on the major exchanges continuing at a pace. 

Another_Saver

Thrugelmir said:

itwasntme001 said:

There are a lot of companies adding value outside of the listed firms, Private equity is becoming more attractive because public equities look very expensive.

Private equity has been growing for decades.  Private equity has need of a public listing as has no requirement to raise capital. Having no public listing provides a considerable cost saving as well. With no need to provide trading updates or accord with closed share trading periods etc. Retail investors are effectively shut out of this segment of the market. With the decline in the number of listed companies on the major exchanges continuing at a pace. 

Private equity is just another form of capital market but with much higher transaction costs than public. Lack of disclosure is not necessarily a good thing for external investors. There are units trusts and ITs available to retail investors targeting this space.