Bonds for the Long Run? The Rate of Return on Corporate Bonds in Belgium, 1838-1939

Abstract

We investigate corporate bond returns for the period 1838-1939 by using a unique new sample from the Brussels Stock Exchange. The value-weighted annualized total rate of return, net of defaults and taxes, is 4.33% in nominal terms and 2.81% in real terms. Estimates of average returns show that corporate bonds may rival equities in terms of realized performance over extended periods of time seeing corporate bonds outperformed equities during the entire nineteenth century. The risk-adjusted performance of corporate bonds based on Sharpe ratios exceeds that of equities and sovereign bonds during the corporate bond market’s first centennial.

Keywords: Indices, Long-Run Returns, Corporate Bonds, Historical Bond Markets, Data Bias

JEL Classification: G11, G12, N23, N24