Earnings growth

According to economist Robert J. Shiller, real earnings per share grew at a 3.5% annualized rate over 150 years.

[2] Since 1980, the most bullish period in U.S. stock market history, real earnings growth according to Shiller, has been 2.6%.

[3] Growth stocks generally command a higher P/E ratio because their future earnings are expected to be greater.

He found that This suggests that the significantly high P/E ratio for the Nifty Fifty as a group in 1972 was actually justified by the returns during the next three decades.

Ben McClure[4] suggests that period for which such rates can be sustained can be estimated using the following: It has been suggested that the earnings growth depends on the nominal GDP, since the earnings form a part of the GDP.

[5][6] It has been argued that the earnings growth must grow slower than GDP by approximately 2%.