Hope does not pay the bills.

ONE large obstacle in the path of a stock market recovery is the smug expectation that such a revival is bound to happen.

After three years of pain, many investors seem to feel that it's high time to get back to the merry business of making money in stocks. Notice the cash flooding back into stock mutual funds--$46.7 billion in the second quarter, according to the Investment Company Institute.

And why not? Economic growth and corporate profits show signs of revival. No bear market lasts forever. It would be heartwarming to see patient investors rewarded for hanging on steadfastly through the travails of 2000-02.

Only thing is, the market is not in the business of warming hearts. It recognizes no obligation to behave according to anybody's preset schedule, and indeed has a long and consistent history of thwarting popular expectations.

"A sense of entitlement continues to pervade the equity market," says Christopher Low, chief economist at FTN Financial in New York. "After three years of big declines, investors figure the market owes them a rally."

So it's a fine time to remind ourselves that there is no "owe" in equities. People who want an investment carrying an obligation are better off in bonds or some other debt instrument. Stock investors, as part owners of an enterprise, get a crack at dividends and capital gains only after expenses, debt service and every other obligation are paid off.

As the recent boom-bust cycle in stocks has made painfully plain, a related form of complacency can afflict investors as they think about the "market value" of their equity holdings.

If I own 500 shares of a stock that traded yesterday in multimillion-share volume and closed at $10, it's perfectly sensible to consider my holding to have a value of $5,000 or thereabouts.

I go astray, though, if I start to think of stock market value as money. Journalists fall prey to this error when we look at the Wilshire 5000 Total Stock Market Index, commonly used as a gauge of the aggregate wealth represented by equity holdings.

This index peaked at 14,752 on March 24, 2000, and fell to 7,343 by Oct. 9, 2002. From this raw data it is said that investors lost $7.4 trillion in the bear market.

Well, for all its value on our net-worth statements, as collateral and so forth, that $7.4 trillion was never ours to spend. If investors as a group had tried simultaneously to "withdraw" all of it from their accounts, much of it would have vaporized.

As it happened, many people did try to convert their stock holdings into money from early 2000 to late 2002, and half the nominal quantity of dollars in their accounts vanished. More recently, an upturn in stock prices has restored some of this lost "value." By the end of last week the Wilshire 5000 was back up to 9,454, restoring $2.1 trillion of the lost $7.4 trillion.

To my mind, there are good reasons to hope for further recovery in the stock market. "The combination of reasonably good profit prospects and still pessimistic pricing leads us to believe that equities will do quite well going forward, as long as the U.S. economy manages to avoid a depression," said Jason Kotenberg, an analyst at money manager Bridgewater Associates in Westport, Conn.

From such arguments can a hopeful view of stocks be constructed. Hope yes, obligation no.

--Chet Currier, Bloomberg News