Historical Returns of the Market Portfolio
58 Pages Posted: 2 Jun 2017 Last revised: 14 Nov 2017
Date Written: November 11, 2017
Using a newly constructed unique dataset, we are the first to document returns of the market portfolio that contains basically all assets in which financial investors across the globe have invested. We analyze its return and risk characteristics since 1960. The market portfolio realizes a compounded real return of 4.36% with a standard deviation of 11.5% annually. This figure differs from those reported for aggregate wealth in recent literature. We also evaluate the performance of alternative portfolio allocations with fixed weights and periodic rebalancing. We find support for their use as benchmarks for multi-asset portfolios, although they are not macro consistent.
Keywords: Asset Allocation, Benchmarking, Investing, Market Portfolio
JEL Classification: G11, G12
Suggested Citation: Suggested Citation