A Century of Global Stock Markets

32 Pages Posted: 15 May 2000 Last revised: 18 Aug 2022

See all articles by Philippe Jorion

Philippe Jorion

University of California, Irvine - Paul Merage School of Business

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 1997

Abstract

The expected return on equity capital is possibly the most important driving factor in asset allocation decisions. Yet, the long-term estimates we typically use are derived from U.S. data only. There are reasons to suspect, however, that these estimates of return on capital are subject to survivorship, as the United States is arguably the most successful capitalist system in the world; most other countries have been plagued by political upheaval, war, and financial crises. The purpose of this paper is to provide estimates of return on capital from long-term histories for world equity markets. By putting together a variety of sources, we collected a database of capital appreciation indexes for 39 markets with histories going as far back as the 1920s. Our results are striking. We find that the United States has by far the highest uninterrupted real rate of appreciation of all countries, at about 5 percent annually. For other countries, the median real appreciation rate is about 1.5 percent. The high return premium obtained for U.S. equities therefore appears to be the exception rather than the rule. Our global database also allows us to reconstruct monthly real and dollar-valued capital appreciation indices for global markets, providing further evidence of the benefits of international diversification.

Suggested Citation

Jorion, Philippe and Goetzmann, William N., A Century of Global Stock Markets (January 1997). NBER Working Paper No. w5901, Available at SSRN: https://ssrn.com/abstract=225683

Philippe Jorion (Contact Author)

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William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

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