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Equities outperform inflation bonds and cash say professors

08 Feb 2011

Despite a remarkable recovery since the financial crisis, stock markets have given a poor return since the beginning of 2000, according to the annual Global Investment Returns Sourcebook, produced by a team of finance experts at London Business School.

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However, in the Sourcebook, published by Credit Suisse’s Research Institute, Professors Elroy Dimson, Paul Marsh and Dr Mike Staunton reveal that over the long run, equities have outperformed inflation, bonds and cash in every market examined.

The Sourcebook provides data stretching back to 1900, covering bills, bonds, currencies, inflation and stocks, with investment performance updates and analysis of the influence of style, such as size, momentum or value and growth.

It spans 19 countries which have being doing business for the past 110 years in Africa, Asia, Europe and North America. The authors analyse long-run risk, the historical extremes of investment performance and the rewards gleaned off investing in the equity and bond markets.

Elroy Dimson, Leverhulme Emeritus Fellow and Emeritus Professor of Finance, commented: “We are struck by the volatility of the size, value and momentum effects. Over the long term, all three factors have provided a positive risk premium. But over shorter intervals, these premia can easily go into reverse.”

Giles Keating, Head of Private Banking Research at Credit Suisse, said: “In a period where global imbalances continue to weigh upon economies, the long term perspective that the Sourcebook provides is a valuable guide to financial market trends.”

For more information, visit: https://www.credit-suisse.com/upload/news-live/000000022320.pdf