PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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226 MODELING FINANCIAL SCENARIOSbut no one bin produces as large a proportion of the outcomes asthe one occurrence out of 78 years of the historical experienceto be as obvious on the graph.The mean dividend yield for equities is 1.5% for the firstyear and 2.3% for the 50th-year values. The 1st—99th percentilerange after 10 years is 0.6% to 3.9%. The funnel of doubt graphof the dividend yield (Figure 18) increases over time as interestrates and inflation do. Figure 19 displays the histogram ofthe modeled dividend yields and the actual dividend yields overthe period 1871 through 2003, based on data available fromRobert Shiller [39]. Historically, dividend yields have variedmore widely than the model predicts and have been centered ata higher level. This may be a result, in part, of a structural shiftin the dividend payment history in the United States. Bernstein[6] notes that prior to the late 1950s, stock dividends tendedto be higher than interest rates on corporate bonds. This wasbased on the understanding that stocks were riskier than bondsand therefore should pay a higher return. Since 1959 though,dividend yields have tended to be lower than interest rates, rangingfrom 1.1% to 5.4%, which is in line with the simulationresults.Unemployment and Real Estate ReturnsThe mean value of the unemployment rate, as shown in Table1, begins at 6.0% and increases to 6.1% (which is the longrunmean value) for the end of 50 years. The 1st—99th percentilerange after 10 years is 3.5% to 8.7%. Figure 20 shows that thefunnel of doubt graph neither increases over time (as interestrates and inflation do) nor decreases (as stock returns do). Thehistogram of modeled unemployment rates along with the distributionof historical values over the period from 1948 through2003 are shown in Figure 21. By selecting only a single unemploymentrate from each year (January), the frequency of the historicalvalues corresponds with that of the model values, whichare the unemployment rates indicated after the first year of the
MODELING FINANCIAL SCENARIOS 227FIGURE 18Distribution of Dividend Yield Projection Period:1Yearto50YearsFIGURE 19Actual Dividend Yields on S&P 500 (1871—2003) vs.Model Values (5,000 Iterations)
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VOLUME XCII NUMBERS 176 and 177PROC
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FOREWORDActuarial science originate
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2005 PROCEEDINGSCONTENTS OF VOLUME
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2005 PROCEEDINGSCONTENTS OF VOLUME
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Editorial Committee, Proceedings Ed
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2 AN EXAMINATION OF THE INFLUENCE O
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10 AN EXAMINATION OF THE INFLUENCE
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AN EXAMINATION OF THE INFLUENCE OF
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RISKINESS LEVERAGE MODELSRODNEY KRE
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RISKINESS LEVERAGE MODELS 33There a
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RISKINESS LEVERAGE MODELS 35where f
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RISKINESS LEVERAGE MODELS 37where a
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RISKINESS LEVERAGE MODELS 39Various
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RISKINESS LEVERAGE MODELS 49The las
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RISKINESS LEVERAGE MODELS 51ple. Th
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RISKINESS LEVERAGE MODELS 55We also
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RISKINESS LEVERAGE MODELS 57Mean Va
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RISKINESS LEVERAGE MODELS 59APPENDI
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DISCUSSION OF A PAPER PRESENTED AT
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RISKINESS LEVERAGE MODELS 63known t
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RISKINESS LEVERAGE MODELS 67implies
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RISKINESS LEVERAGE MODELS 734. INTE
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RISKINESS LEVERAGE MODELS 79REFEREN
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RISKINESS LEVERAGE MODELS 81EXHIBIT
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RISKINESS LEVERAGE MODELS 83
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WHY LARGER RISKS HAVE SMALLER INSUR
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ADDRESS TO NEW MEMBERS 151ateship a
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ADDRESS TO NEW MEMBERS 153You shoul
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ADDRESS TO NEW MEMBERS 155strength
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MINUTES OF THE 2005 CAS SPRING MEET
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MINUTES OF THE 2005 SPRING MEETING
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THE APPLICATION OF FUNDAMENTAL VALU
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A NEW METHOD OF ESTIMATING LOSS RES
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ARCHITECTURE FOR RESIDENTIAL PROPER
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ESTIMATING THE WORKERS COMPENSATION
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INCORPORATION OF FIXED EXPENSESGEOF
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INCORPORATION OF FIXED EXPENSES 681
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DISCUSSION OF PAPER PUBLISHED INVOL
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APPLICATION OF THE OPTION MARKET PA
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THE “MODIFIED BORNHUETTER-FERGUSO
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ADDRESS TO NEW MEMBERS-NOVEMBER 14,
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ADDRESS TO NEW MEMBERS 743Now to an
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PRESIDENTIAL ADDRESS-NOVEMBER 14, 2
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PRESIDENTIAL ADDRESS 753me keep my
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MINUTES OF THE 2005 CAS ANNUAL MEET
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MINUTES OF THE 2005 ANNUAL MEETING
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REPORT OF THE VICE PRESIDENT—ADMI
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REPORT OF THE VICE PRESIDENT-ADMINI
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2005 EXAMINATIONS—SUCCESSFUL CAND
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OBITUARIESROBERT GRANT ESPIECLYDE H
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OBITUARIES 825SIDNEY M. HAMMER1931
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OBITUARIES 827J. GARY LaROSE1947—
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OBITUARIES 829PAUL J. SCHEEL SR.193
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OBITUARIES 831LEO M. STANKUSCirca 1
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INDEX TO VOLUME XCIIPage2005 EXAMIN
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835GRAVES, CLYDE H.INDEX—CONTINUE
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837INDEX—CONTINUEDREPORT OF THE V
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PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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