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Historical Returns of the Market Portfolio

51 Pages Posted: 2 Jun 2017  

Ronald Q. Doeswijk

Independent

Trevin Lam

Rabobank

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Institutional Asset Management

Date Written: June 1, 2017

Abstract

Using a newly constructed unique dataset, this study is the first to document returns of the market portfolio for a long period and with a high level of detail. Our market portfolio basically contains all assets in which financial investors have invested. We analyze nominal, real, and excess return and risk characteristics of this global multi-asset market portfolio and the asset categories over the period 1960 to 2015. The global market portfolio realizes a compounded real return of 4.38% with a standard deviation of 11.6% from 1960 until 2015. In the inflationary period from 1960 to 1979, the compounded real return of the GMP is 2.27%, while this is 5.57% in the disinflationary period from 1980 to 2015. The reward for the average investor is a compounded return of 3.24%-points above the saver’s. We also compare the performance of an investor who holds the market portfolio with an investor who uses simple heuristics for the portfolio allocation. Our results suggest that the market portfolio is close to the mean-variance frontier, but our heuristic allocations achieve a significantly higher reward for risk.

Keywords: Asset Allocation, Benchmarking, Investing, Market Portfolio

JEL Classification: G11, G12

Suggested Citation

Doeswijk, Ronald Q. and Lam, Trevin and Swinkels, Laurens, Historical Returns of the Market Portfolio (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2978509

Ronald Q. Doeswijk

Independent ( email )

No Address Available

Trevin Lam (Contact Author)

Rabobank ( email )

Croeselaan 18
Utrecht, 3521 CB
Netherlands
+31 30 21 30543 (Phone)

HOME PAGE: http://www.linkedin.com/pub/dir/trevin/lam

Laurens Swinkels

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Institutional Asset Management ( email )

Rotterdam, 3000
Netherlands
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

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