Investors do better when populations rise

Investors do better when populations rise. Looking at the period 1900-2013, there has been a negative correlation between per capita GDP growth and equity returns. South Africa, for example, has had per capita GDP growth of 1.1% and equity returns of 7.4%, while Ireland has had per capita growth of 2.8% and equity returns of just 4.1%. But, there is a positive correlation between aggregate GDP growth and equity returns (0.51). Why the difference? Population movements. South Africa's aggregate GDP has grown faster than Ireland's but more than half of this is accounted for by a bigger population; Ireland's population has risen very slowly so almost all its economic growth is per capita. The statistical relationship shows that investors will do better when the population is rising and pushing up GDP than when productivity growth alone is pushing up GDP. (VIEW LINK)


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