Stocks for the long run? Evidence from a broad sample of developed markets

Aizhan Anarkulova; Scott Cederburg; Michael S. O'Doherty

doi:10.1016/j.jfineco.2021.06.040

Stocks for the long run? Evidence from a broad sample of developed markets

Aizhan Anarkulova, Scott Cederburg, Michael S. O'Doherty

Finance

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivor and easy data biases that plague other work in this area. A bootstrap simulation analysis implies substantial uncertainty about long-horizon stock market outcomes, and we estimate a 12% chance that a diversified investor with a 30-year investment horizon will lose relative to inflation. The results contradict the conventional advice that stocks are safe investments over long holding periods.

Original language	English (US)
Pages (from-to)	409-433
Number of pages	25
Journal	Journal of Financial Economics
Volume	143
Issue number	1
DOIs	https://doi.org/10.1016/j.jfineco.2021.06.040
State	Published - Jan 2022

Keywords

Easy data bias
Long-horizon stock returns
Loss probability
Survivor bias

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/j.jfineco.2021.06.040

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title = "Stocks for the long run? Evidence from a broad sample of developed markets",

abstract = "We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivor and easy data biases that plague other work in this area. A bootstrap simulation analysis implies substantial uncertainty about long-horizon stock market outcomes, and we estimate a 12% chance that a diversified investor with a 30-year investment horizon will lose relative to inflation. The results contradict the conventional advice that stocks are safe investments over long holding periods.",

keywords = "Easy data bias, Long-horizon stock returns, Loss probability, Survivor bias",

author = "Aizhan Anarkulova and Scott Cederburg and O'Doherty, {Michael S.}",

note = "Funding Information: We thank two referees, Alice Bonaim{\'e}, David Brown, Stephen Brown, Luke DeVault, Ryan Flugum, William Grieser, Travis Johnson, Chris Lamoureux, Andrea Rossi, Florent Rouxelin, Richard Sias, Michael Sposi, Mitch Towner, Tiemen Woutersen, Dexin Zhou, and seminar participants at Florida International University, Rutgers University, and the 2020 Paris December Finance Meeting for helpful comments and suggestions. This research was supported by a grant from the Robert J. Trulaske, Sr. College of Business Large Grant Program. Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",

year = "2022",

month = jan,

doi = "10.1016/j.jfineco.2021.06.040",

language = "English (US)",

volume = "143",

pages = "409--433",

journal = "Journal of Financial Economics",

issn = "0304-405X",

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TY - JOUR

T1 - Stocks for the long run? Evidence from a broad sample of developed markets

AU - Anarkulova, Aizhan

AU - Cederburg, Scott

AU - O'Doherty, Michael S.

N1 - Funding Information: We thank two referees, Alice Bonaimé, David Brown, Stephen Brown, Luke DeVault, Ryan Flugum, William Grieser, Travis Johnson, Chris Lamoureux, Andrea Rossi, Florent Rouxelin, Richard Sias, Michael Sposi, Mitch Towner, Tiemen Woutersen, Dexin Zhou, and seminar participants at Florida International University, Rutgers University, and the 2020 Paris December Finance Meeting for helpful comments and suggestions. This research was supported by a grant from the Robert J. Trulaske, Sr. College of Business Large Grant Program. Publisher Copyright: © 2021 Elsevier B.V.

PY - 2022/1

Y1 - 2022/1

N2 - We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivor and easy data biases that plague other work in this area. A bootstrap simulation analysis implies substantial uncertainty about long-horizon stock market outcomes, and we estimate a 12% chance that a diversified investor with a 30-year investment horizon will lose relative to inflation. The results contradict the conventional advice that stocks are safe investments over long holding periods.

AB - We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivor and easy data biases that plague other work in this area. A bootstrap simulation analysis implies substantial uncertainty about long-horizon stock market outcomes, and we estimate a 12% chance that a diversified investor with a 30-year investment horizon will lose relative to inflation. The results contradict the conventional advice that stocks are safe investments over long holding periods.

KW - Easy data bias

KW - Long-horizon stock returns

KW - Loss probability

KW - Survivor bias

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EP - 433

JO - Journal of Financial Economics

JF - Journal of Financial Economics

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ER -

Stocks for the long run? Evidence from a broad sample of developed markets

Abstract

Keywords

ASJC Scopus subject areas

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