Back to the future
- Equities, not housing, have been the best long-run investment, contrary to recent claims
- Globally, the returns and risks from housing have been between those on equities and bonds
- Gold has given poor returns, high volatility, and been a poor inflation hedge
- Collectibles such as art, wine and musical instruments have beaten cash and government bonds
- Episodes of volatility, as in early 2018, are hard to predict, tell us little about future returns, and appear as mere blips in the long secular rise of equities
- We should expect lower investment returns in future on all asset classes
- Value investors have experienced a lost decade, but there is no guarantee that is about to change
Published by the Credit Suisse Research Institute, in collaboration with London Business School professors, the Credit Suisse Global Investment Returns Yearbook has evolved into a reference volume providing respected long-run return data and risk premium estimates for 23 national stock and bond markets. The 2018 edition of the Yearbook is published today.
In the book, Professors Elroy Dimson and Paul Marsh and Dr Mike Staunton of London Business School examine the industrial transformation that has taken place since 1900, alongside the parallel transition in markets as countries have moved from emerging to developed status. The authors also assess the returns and risks from investing in equities, bonds, cash and currencies in 23 countries and three different regions. They also examine factor investing and the profitability of different investment styles. In a new study, they analyze the investment performance of nonfinancial assets such as housing, collectibles and precious metals.
Key highlights:
- Since 1900, global equities have beaten bonds and bills, outperforming cash (Treasury bills) by 4.3% and bonds by 3.2% a year – a reward for the higher risk associated with investing in stocks
- Emerging markets were the stars of 2017, with a return of 38% vs 23% for developed markets. But over the last 118 years, they have underperformed developed markets by 1% per year.
- Since 1900, the average collectible rose 30-fold in terms of purchasing power – equivalent to an annualized price appreciation of 2.9% - but returned less than stocks globally.
- Of the four collectibles for which the Yearbook considers data back to 1900, wine performed the best with an inflation-adjusted price appreciation of 3.7%, while art achieved just 1.9% per year
- Precious metals and gemstones are not an effective hedge against inflation. Gold, silver and diamonds gave a return lower than US Treasury-bills
- Recent claims that housing provides a large financial reward at lower risk are incorrect. Since 1900, the quality-adjusted real capital gain on worldwide housing is approximately –2% per year.
- Housing has been less risky than equities, but the expression "safe as houses" is misleading. US house prices fell by more than 36% in real terms from their late-2005 peak until their low in 2012....
HT it was out: Abnormal Returns
Some previous years:
2017 Credit Suisse Global Investment Returns Yearbook (and testing smart beta factors)
Lessons From the 2015 Credit Suisse Global Investment Returns Yearbook: Vice Pays
The Enigma Inside The Credit Suisse Global Investment Returns Yearbook 2014
Last year I referred to the authors of the Credit Suisse Global Investment Returns Yearbooks as "the hot new boy band Dimson, Marsh and Staunton" while looking at a picture of Professor Dimson."Credit Suisse Investment Returns Yearbook 2013"
Cracks me up but hasn't gained much traction in the academy.*
And dozens and dozens of posts regarding Professor Dimson's interests, use the "search blog" box if interested.
