How has the stock market increased the past three years?

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How has the stock market increased the past three years?

Postby Nathan Drake » Sun Dec 30, 2012 2:17 am

This may be a silly question, but the following article breaks down inflows/outflows for equity funds and lists retail investors and institutional investors.

http://buzz.money.cnn.com/2012/12/27/in ... cks-bonds/

The net chart makes it look like there should have been a net outflow for the stock market. Is there another investor class I'm missing that can fill the gap?
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Re: How has the stock market increased the past three years?

Postby neurosphere » Sun Dec 30, 2012 2:27 am

From the article:
While individual investors have been shunning the market, institutional investors, such as hedge funds and pension funds, have been significantly adding to their stock positions.


So individuals are pulling money out, but hedge funds, investment banks, pensions, foreign governments (?) may all be investing in stocks but not be considered individual investors.
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Re: How has the stock market increased the past three years?

Postby Nathan Drake » Sun Dec 30, 2012 2:30 am

neurosphere wrote:From the article:
While individual investors have been shunning the market, institutional investors, such as hedge funds and pension funds, have been significantly adding to their stock positions.


So individuals are pulling money out, but hedge funds, investment banks, pensions, foreign governments (?) may all be investing in stocks but not be considered individual investors.


Right, but if you look at the chart they provided, retail investor outflows were much greater than institutional inflows.
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Re: How has the stock market increased the past three years?

Postby bberris » Sun Dec 30, 2012 10:58 am

Net flows aren't directly related to stock prices. As long as the bidders bid higher prices and the sellers ask higher prices, the price will go up.
Also some of the outflow is dividends and stock buy-backs, with very little IPO which aren't really selling pressure.
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Re: How has the stock market increased the past three years?

Postby zaboomafoozarg » Sun Dec 30, 2012 11:02 am

LOL, the comments on that article... wow.
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Re: How has the stock market increased the past three years?

Postby grayfox » Sun Dec 30, 2012 11:55 am

1. I think the total world stock market is about $36.6 T. From the chart, I calculated the net flows and percent of the total world market.

Year...Retail....Inst....Net.....Percent of World Stock Market
2010....122... .169....-47.....0.13%
2011.....67....-155....-88.....0.24%
2012.....83.....152....-69.....0.18%

So the net outflow is a tiny percentage of the total stock market.

2. Even of the the net outflow were zero, stock prices could rise or fall. Demand is how much quantity buyers are willing to buy at a given price. If everyone woke up one day and decided that they were willing to pay twice as much for earnings, i.e. P/E=30 instead of P/E=15, prices would double.

3. People are paying $X for $1 of earnings. Suppose X is $20 for a $1 of earnings. If earnings grows 5%, the price can increase 5% without any change in the demand.

:arrow: One would think that a negative net outflow would reduce the demand for stocks. All other things being equal, it probably would. But the tiny outflow percentage wise is likely swamped by all the other factors.

:?: But I would still be interested in finding out if there are other investor classes that are not included in retail and institutional. What about sovereign funds? Does that count as institutional? What about the PPT? Where is that accounted for?
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Re: How has the stock market increased the past three years?

Postby ofcmetz » Sun Dec 30, 2012 12:42 pm

grayfox wrote:1. I think the total world stock market is about $36.6 T. From the chart, I calculated the net flows and percent of the total world market.

Year...Retail....Inst....Net.....Percent of World Stock Market
2010....122... .169....-47.....0.13%
2011.....67....-155....-88.....0.24%
2012.....83.....152....-69.....0.18%

So the net outflow is a tiny percentage of the total stock market.

2. Even of the the net outflow were zero, stock prices could rise or fall. Demand is how much quantity buyers are willing to buy at a given price. If everyone woke up one day and decided that they were willing to pay twice as much for earnings, i.e. P/E=30 instead of P/E=15, prices would double.

3. People are paying $X for $1 of earnings. Suppose X is $20 for a $1 of earnings. If earnings grows 5%, the price can increase 5% without any change in the demand.

:arrow: One would think that a negative net outflow would reduce the demand for stocks. All other things being equal, it probably would. But the tiny outflow percentage wise is likely swamped by all the other factors.

:?: But I would still be interested in finding out if there are other investor classes that are not included in retail and institutional. What about sovereign funds? Does that count as institutional? What about the PPT? Where is that accounted for?


Nice breakdown Greyfox. Interesting to see how small of a percentage these numbers really are.
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