Wednesday, October 3, 2007

Mapping S&P 500 Performance, Since 1871

One note, the pre-1926 data are from Cowles "Common Stock Indexes", a copy of which I have on the shelf, rather than S&P. There are some problems with Cowles but where else do you find reference to the stock of New York Guano? It's a treasure.

From Political Calculations:

In the world of investing, the performance of the S&P 500 index is the benchmark by which all other investments are measured. Representing roughly 70% of the market capitalization of the entire U.S. stock market, the S&P 500 provides an excellent window into the overall performance of the U.S. equity market.

Previously, Political Calculations has looked at the historical returns of this index, but has limited its study to its calendar-year performance. In other words, we looked at the performance of an investment made in January of a given year, then compared it its value in January of a later year. Plus, we only went back as far as 1900.

Going to the Data Mine
So, we went back to the data mine. More specifically, we went to Yale Professor
Robert J. Shiller's data mine! Shiller maintains an online database of historic S&P 500 performance in an Excel spreadsheet that he's made available to the public.

The data presents the average of the S&P 500 index for each month beginning in January 1871. At the time we began this project, the data for the latter half of 2005 was incomplete, so we supplemented it with Yahoo! Finance's Historical Prices for S&P 500 (from June 2005-December 2005), Standard & Poor's Estimates and PE Excel spreadsheet (for Dividend Yields from September 2004-December 2005 and Price/Earnings ratios from June 2005-December 2005).

While doing so provides a good picture of the index's performance over time, that doesn't necessarily reflect the performance that an investor might see, particularly if they initiate their investment in any of the other 11 months of the year!

Also from Political Calculations:
Backtesting the Modified Limo

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Big 'ol Hat Tip to Open Choke
I told you I'd have a treat waiting when you came back.