Jeremy Siegel

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Jeremy Siegel
Born (1945-11-14) November 14, 1945 (age 78)
PhD)
Academic career
InstitutionsUniversity of Chicago
University of Pennsylvania
FieldMacroeconomics
InfluencesPaul Samuelson
Robert Solow
ContributionsSiegel's paradox

Jeremy James Siegel (born November 14, 1945) is an American economist who is the Russell E. Palmer Professor of Finance at the

Wharton School of the University of Pennsylvania. Siegel comments extensively on the economy and financial markets. He appears regularly on networks including CNN, CNBC and NPR, and writes regular columns for Kiplinger's Personal Finance and Yahoo! Finance. Siegel's paradox
is named after him.

Early life and education

Siegel was born into a Jewish family in

summa cum laude, with membership in Phi Beta Kappa. He obtained a Ph.D. from the Massachusetts Institute of Technology (MIT) in 1971.[1] As a graduate student he studied under Nobel Prize winners Paul Samuelson and Robert Solow
.

Career

He taught at the

Wharton School of the University of Pennsylvania.[1]

As of 2007, Siegel was advisor to WisdomTree Investments, a sponsor of exchange-traded funds; he owned about 2% of the company, which was then worth an estimated $700 million.[2]

Investing advice

In his books Stocks for the Long Run (1998) and The Future for Investors (2005), Siegel outlines his investing theories and advice.

He recommends against holding bonds, arguing their long-term performance tends to be negative after inflation. Siegel's position on bonds has been disputed, with critics proposing his data is flawed due to use of unreliable information from earlier sources.[3][4]

For stocks, Siegel recommends relying primarily or exclusively on

index funds when possible, as active management
tends to underperform market averages over long periods. (When he wrote in the late 1990s and early 2000's, index funds were not necessarily available in 401k plans but have become more popular since then.) He is not opposed to holding a small portion of the portfolio in single stocks, provided their selection is prudent.

For all stocks or investment options, Siegel advise following a "D-I-V" mnemonic as a guideline: prioritizing

bear markets and recessions, and are also more likely to be reasonably valued. He has endorsed the Dogs of the Dow method, of holding the highest-dividend stocks in the Dow Jones Industrial Average. Siegel recommends substantial international stock holdings, up to 40-50%, to avoid home country bias
and obtain a broader variety of options. For valuation, Siegel recommends stocks or indexes that are fairly valued or undervalued while avoiding sectors that are overvalued or trendy, as they tend to offer poor long-term results. He calls this phenomenon the "growth trap" and notes that fast-growing companies, industries or economies are not necessarily good investments.

Siegel's academic research showing dividend-paying companies tend to offer superior long-term performance with lower risk has influenced the construction of indexes used for

fundamental indexing.[6]

TV programs

He has been a frequent guest on the business TV program

Robert Shiller, an economist at the Yale School of Management, whom Siegel has known since their MIT graduate school days. Siegel and Shiller have frequently debated each other on TV about the stock market and its future returns, and have become financial media celebrities, regularly appearing on CNBC.[citation needed
]

Criticisms

IPO debate

Siegel has said that

Crown Business
, 2005), Siegel analyzed 9,000 IPOs between 1968 and 2003 and concluded that IPOs consistently underperformed a small-cap index in nearly four out of five cases.

2000 bullishness

Some have criticized Professor Siegel for being bullish on the stock market back in 2000. In a

BusinessWeek
interview in May 2000 when asked about the stock market, he replied:

"Seven percent per year [average] real returns on stocks is what I find over nearly two centuries. I don't see persuasive reasons why it should be any different from that over the intermediate run. In the short run, it could be almost anything."[7]

That being said, Professor Siegel was correct when he also stated in the same interview:

"I have voiced my concern about the technology sector, and I sometimes advise people to shade down from that sector relative to its percentage in the [Standard & Poor's 500-stock index.] I really am concerned with these companies that have p-e ratios of 90, 100, and above. I still think stocks, as a diversified portfolio, are the best long-run investment. I will say that indexed bonds at 4% are an attractive hedge at the present time. To get a 4% real rate of return, although it's not as high as 6.5% to 7% that we talked about in stocks, as a guaranteed rate of return is certainly comforting against any inflation."

On March 14, 2000, The Wall Street Journal published an opinion piece by Siegel titled: "Big-Cap Tech Stocks Are a

dot com bubble.[8]

Bibliography

Books

Academic journal publications

Awards

1994: Best Business School Professor in worldwide ranking, Business Week[1]

2002: Lindback Award for outstanding university teaching

1996, 2005: Helen Kardon Moss Anvil Award for outstanding MBA teaching

2005: Nicholas Molodovsky Award by the Chartered Financial Analysts Institute to “those individuals who have made outstanding contributions of such significance as to change the direction of the profession and to raise it to higher standards of accomplishment.” [9]

Notes

  1. ^ a b c "Jeremy Siegel". Finance Department. Retrieved 2020-09-09.
  2. ^ "WisdomTree ETFs Target Earnings, But Can Start-up Turn A Profit?". 2007. Retrieved 2007-03-03.
  3. ^ Mcquarrie, Edward F.. “Stocks for the Long Run? Sometimes Yes. Sometimes No.” ERN: Other Microeconomics: General Equilibrium & Disequilibrium Models of Financial Markets (Topic) (2021): n. pag.
  4. ^ McQuarrie, Edward F., The US Bond Market before 1926: Investor Total Return from 1793, Comparing Federal, Municipal and Corporate Bonds Part II: 1857 to 1926 (September 12, 2019).
  5. ^ Jeremy Schwartz (2020). The Dividends of a Dividend Approach. Wisdom Tree Research
  6. ^ "Siegel and Schwartz on Stocks for the Long Run - Bloomberg". Bloomberg News.
  7. ^ "The Great Market Bubble Debate". www.businessweek.com. Archived from the original on 2001-02-11.
  8. ^ Siegel, Jeremy J. (2000). Big-Cap Tech Stocks Are a Sucker's Bet". The Wall Street Journal, accessed 27 November 2021 (paywall).
  9. ^ "CFA Institute Awards". CFA Institute.

External links

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