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John Lintner

John Virgil Lintner, Jr. (February 9, 1916 – June 8, 1983) was a professor at the Harvard Business School in the 1960s and one of the co-creators of the capital asset pricing model.

For a time, much confusion was created because the various economists working on this model independently failed to realize that they were saying much the same thing. They looked at the issue of capital asset valuation from different perspectives. William F. Sharpe, for example, approached the problem as an individual investor picking stocks. Lintner, on the other hand, approached it from the perspective of a corporation issuing shares of stock.

Lintner was also known for a he gave to the Financial Analysts Federation. For the first time he presented what has become known as the "Lintner Paper," formally titled "The Potential Role of Managed Commodity-Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds."[1] Lintner's research combined a volatile asset, managed futures CTAs, with another volatile asset, stocks, to reduce overall portfolio volatility and improve returns. For NonCorrelated investors Lintner's work was a foundational milestone that has been used to advance this investment discipline.

Lintner earned his bachelor's degree from the University of Kansas in 1939. He arrived at Harvard for graduate study the next year. He quickly impressed the faculty, and in 1942 became a member of the Society of Fellows, a three-year paid fellowship with no duties except self-directed research.

Personal life

John Lintner was born to John Virgil and Pearl Lintner in Lone Elm, KS on February 9, 1916. From his first marriage to Sylvia Chace, he had two children, John Howland and Nancy Chace. From his second marriage to Eleanor Hodges, he had a stepson, Allan Hodges. Lintner died of a heart attack while driving on June 8, 1983, in Cambridge, MA.[2]

Education

He received an A.B., in 1939 and a M.A., in 1940 from the University of Kansas; a M.A., in 1942; and Ph.D., in 1946 from Harvard University.[2]

Positions

  • 1939-40 - Instructor, Business Administration, University of Kansas, Lawrence
  • 1941 - Member of Research Staff on fiscal policy, National Bureau of Economic Research, New York
  • 1946-51 - Assistant Professor, Harvard University, Graduate School of Business Administration
  • 1951-56 - Associate Professor, Harvard University, Graduate School of Business Administration
  • 1956-64 - Professor of Business Administration, Harvard University
  • 1964-83 - George Gund Professor of Economics and Business Administration, Harvard University
  • 1950-83 - Member of Board of trustees, Cambridge Savings Bank
  • 1975-83 - Board of director, US & Foreign securities corp, Chase of Boston Mutual Funds
  • Consultant to business & government[2]

Lintner's dividend policy model

Lintner's dividend policy model is a model theorizing how a publicly traded company sets its dividend policy. The logic is that every company wants to maintain a constant rate of dividend even if the results in a particular period are not up to the mark. The assumption is that investors will prefer to receive a certain dividend payout.

The model states that dividends are paid according to two factors. The first is the net present value of earnings, with higher values indicating higher dividends. The second is the sustainability of earnings; that is, a company may increase its earnings without increasing its dividend payouts until managers are convinced that it will continue to maintain such earnings. The theory was adopted based on observations that many companies will set their long-run target dividends-to-earnings ratios based upon the amount of positive net-present-value projects that they have available.

The model then uses two parameters, the target payout ratio and the speed where current dividends adjust to that target:

   

where:

  •   is the dividend per share at time  
  •   is the dividend per share at time  , i.e. last year's dividend per share
  •   is the speed of adjustment rate or the partial adjustment coefficient, with  
  •   is the target dividend per share at time  , with  
  •   is the target payout ratio on earnings per share (or on free-cash-flow per share), with  
  •   is the earnings per share (or free-cash-flow per share) at time  

When applying its model to U.S. stocks, Lintner found   and  .

Bibliography

  • Effect of federal taxes on growing enterprises, J. Keith Butters and John Lintner, 1945, Division of Research, Graduate School of Business Administration, Harvard University [3]
  • Mutual Savings Banks in the Savings and Mortgage Markets, John Lintner, Jan 1, 1948, Harvard university [4]
  • Corporate profits in perspective (National Economic Problems), John Lintner, 1949, American Enterprise Assn.[5]
  • Effects of taxation: Corporate Mergers, J. Keith Butters, John Lintner, William Lucius Carey, 1952, Division of Research, Harvard University [6]
  • The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets, John Lintner, 1965, Review of Economics and Statistics. 47:1, pp. 13–37.
  • Allowance of rates of return on public utility equities: The double leverage controversy, John Lintner, 1980, Working paper - Division of Research, Graduate School of Business Admin, Harvard University, HBS 80-32 [7]
  • Allowance of rates of return on public utility equities: The theory of optimal rate of return regulation of utilities and the double leverage controversy, John Lintner, 1981, Harvard University [8]
  • The potential role of managed commodity financial futures accounts and or funds in portfolios of stocks and bonds, John Lintner, 1983, Working paper, Harvard University [9]
  • Some new perspectives on tests of CAPM and other capital asset pricing models and issues of market efficiency, John Lintner, 1981, Harvard Institute of Economic Research discussion paper [10]

References

  1. ^ Lintner, John Virgil (1983). The Potential Role of Managed Commodity-financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds. Division of Research, Graduate School of Business Administration, Harvard University.
  2. ^ a b c "Contemporary Authors (Biography)". Thomson Gale. January 1, 2004. Retrieved June 29, 2011.[permanent dead link]
  3. ^ "Book". Harvard University. 1945. Retrieved June 29, 2011.
  4. ^ "Book". Harvard University. 1948. Retrieved June 29, 2011.
  5. ^ "Book". American Enterprise Assn. 1949. Retrieved June 29, 2011.
  6. ^ Book. Maxwell. 1970. ISBN 0827720106.
  7. ^ "Book". Harvard University. 1980. Retrieved June 29, 2011.
  8. ^ "Book". Harvard University. 1981. Retrieved June 29, 2011.
  9. ^ "Book". Harvard University. 1983. Retrieved June 29, 2011.
  10. ^ "Book". Harvard Institute of Economic Research. 1981. Retrieved June 29, 2011.

Archives and records

  • John V. Lintner papers at Baker Library Special Collections, Harvard Business School.

john, lintner, this, article, needs, additional, citations, verification, please, help, improve, this, article, adding, citations, reliable, sources, unsourced, material, challenged, removed, find, sources, news, newspapers, books, scholar, jstor, december, 20. This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources John Lintner news newspapers books scholar JSTOR December 2009 Learn how and when to remove this template message John Virgil Lintner Jr February 9 1916 June 8 1983 was a professor at the Harvard Business School in the 1960s and one of the co creators of the capital asset pricing model For a time much confusion was created because the various economists working on this model independently failed to realize that they were saying much the same thing They looked at the issue of capital asset valuation from different perspectives William F Sharpe for example approached the problem as an individual investor picking stocks Lintner on the other hand approached it from the perspective of a corporation issuing shares of stock Lintner was also known for a 1983 presentation he gave to the Financial Analysts Federation For the first time he presented what has become known as the Lintner Paper formally titled The Potential Role of Managed Commodity Financial Futures Accounts and or Funds in Portfolios of Stocks and Bonds 1 Lintner s research combined a volatile asset managed futures CTAs with another volatile asset stocks to reduce overall portfolio volatility and improve returns For NonCorrelated investors Lintner s work was a foundational milestone that has been used to advance this investment discipline Lintner earned his bachelor s degree from the University of Kansas in 1939 He arrived at Harvard for graduate study the next year He quickly impressed the faculty and in 1942 became a member of the Society of Fellows a three year paid fellowship with no duties except self directed research Contents 1 Personal life 2 Education 3 Positions 4 Lintner s dividend policy model 5 Bibliography 6 References 7 Archives and recordsPersonal life EditJohn Lintner was born to John Virgil and Pearl Lintner in Lone Elm KS on February 9 1916 From his first marriage to Sylvia Chace he had two children John Howland and Nancy Chace From his second marriage to Eleanor Hodges he had a stepson Allan Hodges Lintner died of a heart attack while driving on June 8 1983 in Cambridge MA 2 Education EditHe received an A B in 1939 and a M A in 1940 from the University of Kansas a M A in 1942 and Ph D in 1946 from Harvard University 2 Positions Edit1939 40 Instructor Business Administration University of Kansas Lawrence 1941 Member of Research Staff on fiscal policy National Bureau of Economic Research New York 1946 51 Assistant Professor Harvard University Graduate School of Business Administration 1951 56 Associate Professor Harvard University Graduate School of Business Administration 1956 64 Professor of Business Administration Harvard University 1964 83 George Gund Professor of Economics and Business Administration Harvard University 1950 83 Member of Board of trustees Cambridge Savings Bank 1975 83 Board of director US amp Foreign securities corp Chase of Boston Mutual Funds Consultant to business amp government 2 Lintner s dividend policy model EditLintner s dividend policy model is a model theorizing how a publicly traded company sets its dividend policy The logic is that every company wants to maintain a constant rate of dividend even if the results in a particular period are not up to the mark The assumption is that investors will prefer to receive a certain dividend payout The model states that dividends are paid according to two factors The first is the net present value of earnings with higher values indicating higher dividends The second is the sustainability of earnings that is a company may increase its earnings without increasing its dividend payouts until managers are convinced that it will continue to maintain such earnings The theory was adopted based on observations that many companies will set their long run target dividends to earnings ratios based upon the amount of positive net present value projects that they have available The model then uses two parameters the target payout ratio and the speed where current dividends adjust to that target D t D t 1 r D t D t 1 D t 1 r t E t D t 1 r t E t 1 r D t 1 r D t 1 r D t 1 displaystyle begin aligned D t amp D t 1 rho cdot left D t D t 1 right amp D t 1 rho cdot left tau cdot E t D t 1 right amp rho cdot tau cdot E t 1 rho cdot D t 1 amp rho cdot D t 1 rho cdot D t 1 end aligned where D t displaystyle D t is the dividend per share at time t displaystyle t D t 1 displaystyle D t 1 is the dividend per share at time t 1 displaystyle t 1 i e last year s dividend per share r displaystyle rho is the speed of adjustment rate or the partial adjustment coefficient with 0 r 1 displaystyle 0 leq rho leq 1 D t displaystyle D t is the target dividend per share at time t displaystyle t with D t t E t displaystyle D t tau cdot E t t displaystyle tau is the target payout ratio on earnings per share or on free cash flow per share with 0 t 1 displaystyle 0 leq tau leq 1 E t displaystyle E t is the earnings per share or free cash flow per share at time t displaystyle t When applying its model to U S stocks Lintner found r 30 displaystyle rho simeq 30 and t 50 displaystyle tau simeq 50 Bibliography EditEffect of federal taxes on growing enterprises J Keith Butters and John Lintner 1945 Division of Research Graduate School of Business Administration Harvard University 3 Mutual Savings Banks in the Savings and Mortgage Markets John Lintner Jan 1 1948 Harvard university 4 Corporate profits in perspective National Economic Problems John Lintner 1949 American Enterprise Assn 5 Effects of taxation Corporate Mergers J Keith Butters John Lintner William Lucius Carey 1952 Division of Research Harvard University 6 The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets John Lintner 1965 Review of Economics and Statistics 47 1 pp 13 37 Allowance of rates of return on public utility equities The double leverage controversy John Lintner 1980 Working paper Division of Research Graduate School of Business Admin Harvard University HBS 80 32 7 Allowance of rates of return on public utility equities The theory of optimal rate of return regulation of utilities and the double leverage controversy John Lintner 1981 Harvard University 8 The potential role of managed commodity financial futures accounts and or funds in portfolios of stocks and bonds John Lintner 1983 Working paper Harvard University 9 Some new perspectives on tests of CAPM and other capital asset pricing models and issues of market efficiency John Lintner 1981 Harvard Institute of Economic Research discussion paper 10 References Edit Lintner John Virgil 1983 The Potential Role of Managed Commodity financial Futures Accounts and or Funds in Portfolios of Stocks and Bonds Division of Research Graduate School of Business Administration Harvard University a b c Contemporary Authors Biography Thomson Gale January 1 2004 Retrieved June 29 2011 permanent dead link Book Harvard University 1945 Retrieved June 29 2011 Book Harvard University 1948 Retrieved June 29 2011 Book American Enterprise Assn 1949 Retrieved June 29 2011 Book Maxwell 1970 ISBN 0827720106 Book Harvard University 1980 Retrieved June 29 2011 Book Harvard University 1981 Retrieved June 29 2011 Book Harvard University 1983 Retrieved June 29 2011 Book Harvard Institute of Economic Research 1981 Retrieved June 29 2011 Archives and records EditJohn V Lintner papers at Baker Library Special Collections Harvard Business School Retrieved from https en wikipedia org w index php title John Lintner amp oldid 1168864145, wikipedia, wiki, book, books, library,

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