John Lintner


John Virgil Lintner Jr. 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 in Portfolios of Stocks and Bonds." 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 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.

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.

Positions

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, with
  • is the earnings per share at time
When applying its model to U.S. stocks, Lintner found and.

Archives and records

Category:1916 births
Category:1983 deaths
Category:Financial economists
Category:Harvard University alumni
Category:Harvard Business School faculty
Category:Harvard Fellows
Category:University of Kansas alumni
Category:20th-century American economists
Category:Fellows of the Econometric Society
Category:Presidents of the American Finance Association
Category:20th-century statisticians