Spanning the divide between academia and practice...


Recent Insights

October 31, 2023

Real Interest Rates have an immense impact on the stock market as well as the bond market. Nonetheless, they are widely misunderstood.  Hello and welcome back to Reflections on Investing with the Cornell Capital Group. And today we’re going to talk about the real interest rate. I use the word “the real interest rate” as

Click for More
October 10, 2023

Would you believe, that long-term US Treasury securities, historically considered one of the safest investments, have now dropped more than the stock market did during the great recession of 2008? What are the implications for fixed income investments going forward? Hello and welcome back to Reflections on Investing with the Cornell Capital Group.   It’s been

Click for More
October 3, 2023

Discount rate variation (equivalently expected returns, risk premiums) is now at the center of asset pricing questions, from bubbles to the nature of the crash.—– John Cochrane, Presidential address to the American Finance Association.As John Cochrane notes, it is hard to understand stock price movements and related risks without taking account of variation in discount

Click for More
August 29, 2023

In August of 2020 Apple issued a 40 year, 2.55% bond, two years later that bond is down nearly 40%. Apple’s stock on the other hand is up over 50% in that same period. Why is that and what does it imply?  Hello and welcome back to Reflections on Investing with the Cornell Capital Group. Today

Click for More
August 14, 2023

Is a large daily drop in the market a buying opportunity? We used 60 years of daily data to see what happens after the market drops. Hello and welcome back to Reflections on Investing with the Cornell Capital Group. It’s been a while since we’ve done a Reflections, but I think we have an interesting one

Click for More

Featured Publication

In this article, we assume that AI, which we recognize has many different forms, will be a major economic success in that it will lead to greater productivity and rising GDP in the United States. The question for investors is how will it affect stock prices? That depends on whether you are talking about the stock prices of selected individual companies or the value of the aggregate market. We start first with the aggregate market and then turn to individual stocks.Technological breakthroughs, of which we assume AI will be an example, increase social wealth by increasing the goods and services that can be produced from a given set of resources. This is measured by the growth rate in productivity. Productivity growth is a key determinant of real GDP growth per capita which determines the standard of living. The primary source of productivity growth is technological innovation.The chart below plots annual productivity growth from 1960 through 2022. The first thing to note is that the rate of increase is not large, averaging only 0.38% per year. The second thing to note is that the growth rate was variable, falling in recessions and rising in recoveries. Finally, it is difficult to tie

Read More