Comparison of U.S. Stock Indices

Abstract

This paper compares stock indices for USA: Large-Cap stocks (S&P 500), Mid-Cap stocks (S&P 400), and Small-Cap stocks (S&P 600). Between 1981 and 2015 the Large-Cap stocks returned about 11.3% per year on average, while the Mid-Cap stocks returned 14.0% per year. Between 1992 and 2015, the Small-Cap stocks returned 11.2% per year. But there were periods where each of these stock indices performed either best or worst. This paper studies more detailed performance statistics, including the average, best and worst investment periods, the correlation of returns, the historical probabilities of loss and performing worse than inflation and US government bonds, and the recovery times for these stock indices. The earnings and dividend growth is also studied and used to forecast the future returns on the stock indices.

Keywords: Stock Indices, S&P 500, S&P 400, S&P 600