Despite the prevailing thinking that the period of high redifferent. Stock returns, measured by the stock index hava significantly low 4.63% on a yearly basis. In the same pmet 1%. Out of this perspective, it is very difficult to talkmarket, because, essentially, it has not happened yet.domestic product nominal growth rate reached 9.3% iproduced a growth rate twice as high as their very marsituationis typicalof a secularly falling trend.There are some additional factors that are opposing thCroatia. A negative trend in the P/E indicator namely obetweenprice and earnings per share is one more signal o

The sun behind the clouds.

0510152025301996 1997 1999

[1]The companies’ earnings growth rate can be apprretained earnings rate. Since dividend payments of the coone can appreciativelyassume that earnings’ growthrate

Chart: Changes in P/E indicator of the CROBEX index

[1]

The companies’ earnings growth rate can be approximaterate. Since dividend payments of the companies belonging to tthat earnings’ growth rate equals the nominal GDP growth rate

[2]

John Geanakoplos, Michael Magill and Martine Quinzii.

Wealth distribution according to age puts upon an interethe capital market. It is namely known that peers of 40 topposite, peers of 20 to 39 years of age have a much loperiod of retirement. The difference between average oldcan hence reveal the relative change in free capital, whicThe correlation between MY relation and P/E indicator isthe period, in which the capital market should be in a secuu

rns on the Croatian market is over, reality is very muche indeed posted, during the period from 1996 until today,eriod, inflation reached 3.61 %. Real return hence hardlyabout the end of a “golden” age on the Croatian capitalhis thesis can be confirmed by the fact that the grossn the same period. Therefore, companies’ earnings[1]et capitalisation, respectively the companies’ value. Thise so often called “golden” age on the capital market incurred during the studied period. The declining relationf low returns and secularly falling trends.

Thursday, 20.11.2008

2002 2004 2007 2008

ximated by multiplying the GDP growth rate with thempanies belonging to the index were almost insignificant,equals the nominalGDP growthrate.

Linear PE

Source: Agram Brokeri

by multiplying the GDP growth rate with the retained earningse index were almost insignificant, one can appreciatively assume

ting model for cash flow observation and secular trends on59 years of age are the wealthiest in an economy. On thewer net value available for savings and investments in theand young population (MY relation[2]) within an economyh comes to the market via investments and pension funds.significantly high, and the MY relation can help determinelarly growing alternativelyfalling trend.

00.20.40.60.811.21.41.61976 1981 1986 1991 1996 20

Chart: MY cohort changes in Croatia

Chart: CROBEXindex changes

The MY relation in the so called golden age on the mcycle, implying declining markets and falling P/E indichappened. The P/E indicator was on a decreasing trengrowthrate. All signals of a bear market.We may conclude from the facts that have been mecrisis ends, looking ahead of the highest rising trend sinNo asset of any class will be able to outmatch the stocgrowing market come? Fast, one could say, judging byat 6.09[1], is at its historicallylowest level.Some security margins of a long term sustained grochanges in MY relation combined with pension fundscontributionsthan disbursements,and in the long term

1 2006 2011 2016 2021 2026cohort

Source: Agram Brokeri

arket in Croatia has visibly entered a negative phaseator. As we saw earlier, the very same thing actuallyd, and stock returns were half those of the economictioned that the Croatian capital market is, when thece the creation of the stock exchange market in 1991.k returns achievable on the long run. When does thisthe P/E indicator of the Crobex index, which currentlyth may be found in low P/E indicators, favourablethat will have in the next decade significantly moredevelopmentof investmentfunds.