Long-Horizon Losses in Stocks, Bonds, and Bills

114 Pages Posted: 18 Nov 2021 Last revised: 11 Jan 2024

See all articles by Aizhan Anarkulova

Aizhan Anarkulova

Emory University - Department of Finance

Scott Cederburg

University of Arizona - Department of Finance

Michael S. O'Doherty

University of Missouri at Columbia - Department of Finance

Date Written: August 9, 2023

Abstract

We study long-horizon returns of domestic stocks, international stocks, bonds, and bills with a focus on periods with real losses in each asset class. Our dataset construction and estimation methods mitigate survivor bias and offer novel, quantitative evidence on the joint distribution of asset class returns. We find that (i) 30-year real loss probabilities in domestic markets are high for stocks (13%), bonds (27%), and bills (37%); (ii) exchange-rate fluctuations offset local inflation to produce a lower loss probability for international stocks (4%); and (iii) equity losses are driven by negative real dividend growth attributable to declining profit shares.

Keywords: Long-horizon returns, loss probability, survivor bias, easy data bias

JEL Classification: C15, D31, G10, G11, G12, G15, G17, N20

Suggested Citation

Anarkulova, Aizhan and Cederburg, Scott and O'Doherty, Michael S., Long-Horizon Losses in Stocks, Bonds, and Bills (August 9, 2023). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2023, Available at SSRN: https://ssrn.com/abstract=3964908 or http://dx.doi.org/10.2139/ssrn.3964908

Aizhan Anarkulova

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States

Scott Cederburg (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Michael S. O'Doherty

University of Missouri at Columbia - Department of Finance ( email )

Robert J. Trulaske, Sr. College of Business
401 Cornell Hall
Columbia, MO 65211
United States

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