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Economists at Natixis analyze if the return on European equities is too high as shareholder remuneration captures too much of the value-added at the expense of wages and investment or too low due to the risk associated with holding equities. 

Key quotes

“We see a 30-year average total return on equities of 9% in the eurozone, of which two-thirds from capital gains and one-third from dividends. When we look at the change in the total return on equities over time, we see that it has been lower since 2002 than it was before.”

“The criticism is that the return on equities is too high because the remuneration of shareholders is too high but there has been a decline in shareholder remuneration since 2008 going hand-in-hand with an increase in wages paid and an upswing in investment from 2015.”

“The return on equities is too low to compensate for the risk associated with holding equities, which is high given the high variability of the return on equities, and that, as a result, savers have switched to risk-free assets at the expense of equities and, more broadly, financing of companies. We see the low level and decreasing weight of equities in the portfolios, and the high level of the weight of risk-free assets.

 

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