Description
Investors have too often extrapolated from recent experience. In the 1950s, who but the most rampant optimist would have dreamt that over the next fifty years the real return on equities would be 9% per year? Yet this is what happened in the U.S. stock market. The optimists triumphed. However, as Don Marquis observed, an optimist is someone who never had much experience. The authors of this book extend our experience across regions and across time. They present a comprehensive and consistent analysis of investment returns for equities, bonds, bills, currencies and inflation, spanning sixteen countries, from the end of the nineteenth century to the beginning of the twenty-first. This is achieved in a clear and simple way, with over 130 color diagrams that make comparison easy.
Crucially, the authors analyze total returns, including reinvested income. They show that some historical indexes overstate long-term performance because they are contaminated by survivorship bias and that long-term stock returns are in most countries seriously overestimated, due to a focus on periods that with hindsight are known to have been successful.
The book also provides the first comprehensive evidence on the long-term equity risk premium--the reward for bearing the risk of common stocks. The authors reveal whether the United States and United Kingdom have had unusually high stock market returns compared to other countries. The book covers the U.S., the U.K., J
Chapter
3.5 Measuring inflation and fixed-income returns
Chapter 4 International capital market history
4.3 Stock market returns around the world
4.4 Equities compared with bonds and bills
4.5 Investment risk and the distribution of annual returns
4.6 Risk, diversification, and market risk
4.7 Risk comparisons across asset classes and countries
Chapter 5 Inflation, interest rates, and bill returns
5.1 Inflation in the United States and the United Kingdom
5.2 Inflation around the world
5.3 US treasury bills and real interest rates
5.4 Real interest rates around the world
6.1 US and UK bond returns
6.2 Bond returns around the world
6.4 Inflation-indexed bonds and the real term premium
6.5 Corporate bonds and the default risk premium
Chapter 7 Exchange rates and common-currency returns
7.1 Long-run exchange rate behavior
7.2 The international monetary system
7.3 Long-run purchasing power parity
7.4 Deviations from purchasing power parity
7.5 Volatility of exchange rates
7.6 Common-currency returns on bonds and equities
Chapter 8 International investment
8.1 Local market versus currency risk
8.2 A twentieth century world index for equities and bonds
8.3 Ex post benefits from holding the world index
8.4 Correlations between countries
8.5 Prospective gains from international diversification
8.6 Home bias and constraints on international investment
Chapter 9 Size effects and seasonality in stock returns
9.1 The size effect in the United States
9.2 The size effect in the United Kingdom
9.3 The size effect around the world
9.4 The reversal of the size premium
Chapter 10 Value and growth in stock returns
10.1 Value versus growth in the United States
10.2 Value and growth investing in the United Kingdom
10.3 The international evidence
Chapter 11 Equity dividends
11.1 The impact of income
11.2 US and UK dividend growth
11.3 Dividend growth around the world
11.4 Dividend growth, GDP growth, and real equity returns
11.5 Dividend yields around the world and over time
11.6 Disappearing dividends
Chapter 12 The equity risk premium
12.1 US risk premia relative to bills
12.2 Worldwide risk premia relative to bills
12.3 US risk premia relative to bonds
12.4 Worldwide risk premia relative to bonds
Chapter 13 The prospective risk premium
13.1 Why the risk premium matters
13.2 How big should the risk premium be?
13.3 Measuring the premium
13.4 Arithmetic and geometric premia
13.5 The changing consensus
13.6 History as a guide to the future
13.7 Expectations of the risk premium
Chapter 14 Implications for investors
14.1 Market risk in the twenty-first century
14.2 Inferences from other markets
14.3 What does the future hold?
14.4 Implications for individual investors
14.5 Implications for investment institutions
Chapter 15 Implications for companies
15.2 Corporate investment decisions
15.3 Corporate financing decisions
Part Two: Sixteen countries, one world
Chapter 17 Our global database
Chapter 27 The Netherlands
Chapter 32 United Kingdom
Triumph of the Optimists
：101 Years of Global Investment Returns
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