from rising prices. In a recent period of 10 years, the yield of assets in 5
investment trusts (largely invested in common stocks) was 8 per cent
against a 3 per cent yield for bonds.
In the 1960s the experience may not be so fortunate: yields on common
stocks are already below those on bonds. But note that with commodity
prices rising by 20 per cent, a gain of common stock prices of only 40
per cent (3 per cent a year) in the 1960s would (with equities equal to
50 per cent) protect against rising prices.
The record of book and market values as of June 30, 1958, does not
suggest as large gains from investment in common stocks as adumbrated
above. Market value of all investments is but 27 per cent, and for common
stocks 89 per cent, above book value. The rise in the value of common
stocks is less than that in prices, and since stocks are but one-half of investments, the offset is less than one-half. Part of the explanation is that investment in common stocks was much less in 1940 than in 1956; part is that
to some extent book values are inflated as a result of revaluations and sales
of stocks and reinvestment in others, and hence the difference in book and
market value does not reflect fully the rise of stock prices. A final point is
that in the years 1940 to 1958, the yield on common stocks exceeded that
on Aaa bonds by 41 per cent. This is an important contribution to the
neutralization of inflationary forces.
B. Bump, "Philosophical Aspects of Endowment Management in the Small Colleges," Second Annual Boston Forum on Open-end Investment Companies, 1945,
Tripp, treasurer of Rochester University, showed that growth stocks yielded not
only large capital gains but also higher income than other stocks in the 1950s; cf. RES, Higher Education in the United States, Supplement, August, 1960.
B. Bump, op. cit., pp. 24, 29.
Higher Education in the United States: The Economic Problems, Harvard University Press, 1960, part VII.
See, for example,
E. W. Kemmerer, The Outlook of Our College Endowments, 1939, pp. 8-12.
A Study of Income and Expenditures in 60 Colleges, pp. 26-27.
See R. H. Sedgwick, "A New Pension Plan," Harvard Business Review, January- February, 1953, pp. 73-74; The Boston Fund, 106th Quarterly Report, July 31, 1958; and J. D. Millett, Financing Higher Education in the United States, 1952, pp. 317-318; cf. G. Bates in Higher Education in the United States, op. cit., p. 217.
For this chart I am indebted to my former research assistant, now at the University of California, Saul Hymans.
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Higher Education:Resources and Finance.
Contributors: Seymour E. Harris - Author.
Place of publication: New York.
Publication year: 1962.
Page number: 436.
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