Where Siegel Went Awry: Outdated Sources & Incomplete Data

44 Pages Posted: 26 Mar 2021 Last revised: 14 Nov 2023

See all articles by Edward F. McQuarrie

Edward F. McQuarrie

Santa Clara University - Leavey School of Business

Date Written: July 23, 2021


When Jeremy Siegel published his Stocks for the Long Run thesis, little information was available on stocks before 1871 or bonds before 1926. But today, digital archives have made it possible to compute real total return on stock and bond indexes back to 1793. This paper presents that new market history and compares it to Siegel’s narrative. The new historical record shows that over multi-decade periods, sometimes stocks outperformed bonds, sometimes bonds outperformed stocks, and sometimes they performed about the same. More generally, the pattern of asset returns in the modern era, as seen in the Ibbotson SBBI and other datasets that begin in 1926, emerges as distinctly different from what came before. Contrary to Siegel, the pattern of asset returns seen in the 20th century does not generalize to the 19th century. A regime perspective is introduced to make sense of the augmented historical record. It argues that both common stocks and long bonds are risk assets, capable of outperforming or underperforming over any human time horizon. [A version has now published in the Financial Analysts Journal, see revision notes in paper.]

Keywords: stock returns, bond returns,19th century financial markets, equity premium, asset allocation, portfolio management, World ex-USA

JEL Classification: E32, G11, G12, N21

Suggested Citation

McQuarrie, Edward F., Where Siegel Went Awry: Outdated Sources & Incomplete Data (July 23, 2021). Available at SSRN: https://ssrn.com/abstract=3805927 or http://dx.doi.org/10.2139/ssrn.3805927

Edward F. McQuarrie (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

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