I have been engaged for some years in an effort to reexamine Jeremy Siegel’s dual thesis: that over any long interval stocks will beat bonds, and likewise, that over long intervals stocks can be expected to deliver a real return on the order of 6.6%, doubling wealth every eleven years.
I collected new data for 19th century US markets, and collated international data from others. Siegel’s thesis does not survive confrontation with the new data. Intervals where bonds beat stocks have recurred across centuries and countries. Long periods where stocks returned little, nothing, or less than nothing have also recurred.
The results and their interpretation can be found in a paper that can be downloaded here. A Boglehead forum was started here. A few media mentions can be found here and here.
Finally, a spreadsheet containing the new stock and bond return series can be downloaded here: Real returns on stocks and bonds 1793 to 2019 version 2-0. You can use it to create your own charts or to investigate sub-periods. It contains some specific comparisons with reconstructed Siegel series, to pinpoint where the divergence occurs.
Here is the abstract of the paper:
When Jeremy Siegel published his Stocks for the Long Run thesis, little information was available on stocks before 1871 or bonds before 1926. But today, digital archives have made it possible to compute real total return on stock and bond indexes back to 1793. This paper presents that new market history and compares it to Siegel’s narrative. The new historical record shows that over multi-decade periods, sometimes stocks outperformed bonds, sometimes bonds outperformed stocks, and sometimes they performed about the same. More generally, the pattern of asset returns in the modern era, as seen in the Ibbotson SBBI and other datasets that begin in 1926, emerges as distinctly different from what came before. Contrary to Siegel, the pattern of asset returns seen in the 20th century does not generalize to the 19th century. A regime perspective is introduced to make sense of the augmented historical record. It argues that both common stocks and long bonds are risk assets, capable of outperforming or underperforming over any human time horizon.
Keywords: stock returns, bond returns,19th century financial markets, equity premium, asset allocation, portfolio management
I am trying to build an updated version of your real stock return data for a post on my blog (https://blog.ephorie.de).
I am a little bit confused by the CRSP US Total Market Index Total Return data. I would need the annual return data for 2020, 2021, and 2022.
The only data that I find are those: https://ycharts.com/indices/%5ECRUSTMTR or https://institutional.vanguard.com/VGApp/iip/institutional/csa/investments/benchmarks/crsp/performance
When I compare them with your data the annual returns are very much off. Is this the case because you calculate from Jan. to Jan. and not from Dec. to Dec.?
Where do I find the data that I need or can you provide them?
Thank you!
best,
h
Yes, I use January to January data, so the 12 months to January 2019 is the last data point. I got CRSP data through my library’s subscription to Wharton Research Services. If no access, you could get pretty close using the Vanguard ETF that tracks CRSP (VTI)
I’ve just discovered your work and I just want to say thank you! This is an amazing set of data you’ve compiled.
Thanks, and happy to answer any questions as you dig deeper into the data.
Is this data for US only returns or also international?
Most of the paper is concerned with US returns, with the new findings concentrated in the 19th century. There are some international returns, more consistent with the 19th than the 20th century in the US
Stocks up 50% in 1929, flat in 2008 and down 40% in 2009? Looks like you made an error in your spreadsheet data. Maybe an error that delays the data by a year? Check it
Please see the notes. Returns are to January of the year named. So yes, stocks were up when measured from January 1928 to January 1929.
Hi there
Very interesting and thanks for supplying the data. Much appreciated.
Question: If you look on nominal returns and try to compare the scatterplot with the one recently posted in the media from FT on Robert Shiller data (https://www.ft.com/content/c93f3660-821f-458b-ae0f-23ac05b8f03f). Why does it differ that much? Your data indicate negative bond returns in 1931 of 18% however it is roughly 0 in FT?
Hi: I use corporate bonds through that period, while Shiller uses Treasuries. Corporate bonds suffered severely in the Depression, Treasuries rallied after a dip following the devaluation of the British pound, in a flight to safety.
Thanks for the clarification! 🙂
I cannot seem to open your Excel spreadsheet on real rates of returns on stocks and bonds V 2.0. I’m using a Google Chrome browser. Could you kindly send me the spreadsheet. Thanks so very much!
Alas, you will need to find a browser that allows you to download an Excel file created in Office 365.
This is an incredible siege of history and data. Great paper and data. Thank you.
Thank you, Ethan. You are too kind!