Global Investment Returns Yearbook
In a new podcast, Paul Marsh, Emeritus Professor of Finance and co-author of the Credit Suisse Global Investment Returns Yearbook, discusses what information on historic investment returns can tell us about the current crisis
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The Global Investment Returns Yearbook analyses total returns since 1900 for 17 national stock markets and three worldwide indexes. Co-author of the Yearbook, Paul Marsh, explains that looking at this historic data can help shed light on the severity of the current economic crisis, and provide guidance on likely future investment returns.
"In the Yearbook we pick out six periods of serious distress," Paul explains, "the first and second world wars, and the four worst bear markets since 1900. World equities fell much more during the peace time bear markets than during the two world wars. The worst period on record for the world index was the Wall Street crash, when the index fell by 54%, but the current crisis is a close runner up."
In the podcast Paul maintains that, despite this, investors should not lose faith with equities. In the past, equities have delivered a handsome risk premium relative to cash, and because of the way equities are priced in the market, investors can continue to expect to a premium of 3 to 3½% per year in future. He cautions, however, that even if held for the long-run, equities still carry appreciable risk.