From: Robin Hanson (rhanson@gmu.edu)
Date: Fri Mar 24 2000 - 07:55:16 MST
Steve C. Dotson wrote:
> >I've revised a short paper I wrote a year and a half ago, wherein
> >I basically predict a "singularity" in the next century.
> >http://hanson.gmu.edu/longgrow.html
>Does this mean you have a rekindled interest in the equity markets as
>sound investments, or are you still solidly behind certain real estate
>investments to the exclusion of stocks?
Huh? If investors were rational and equally informed, *all*
forms of investment would give the same expected risk-corrected
rate of return. As stock dividends are only 3% of US national
income, stocks would have to be a small part of the average
portfolio, but still a reasonable part.
If people are not rational and if I think I have better info than
others, then I need to compare the *price* of stocks to future
returns. No matter what the future returns, if the price is too
high, it is not a good investment.
If I knew we were about to see explosive growth in the next ten
years, that *still* wouldn't tell me to invest in stocks as
opposed to all the other forms of investment available. A big
question is whether stock dividends will be a higher or lower
fraction of total world income during the explosion vs. now.
My personal interest in real estate was just due to the fact
that my family wanted us to own a house.
Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323
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