In the pre-Keynesian world of frequent bouts of deflation, as shown in Exhibit 5.7, the dividend yield had to exceed the Treasury yield in order for investors to be enticed to keep investing in stocks because they couldn’t count on stock price appreciation in that environment. For example, during the 54-year period between 1871 and 1925, the stock market index only increased from four to ten, an average annual pace of less than 2 percent. In the persistently positive inflation, post–World War II world, more of the return came from price appreciation as earnings tend to grow roughly in line
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