Stocks for the Long Run? Evidence from a Broad Sample of Developed Markets
81 Pages Posted: 3 Jun 2020 Last revised: 19 Jan 2021
Date Written: January 18, 2021
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: Long-horizon stock returns, loss probability, survivor bias, easy data bias
JEL Classification: C15, C58, G10, G11, G12, G15, G17, N20
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