What Rate of Return Can You Reasonably Expect… or What Can the Long Run Tell Us about the Short Run?

Peter L. Bernstein

Financial Analysts Journal, 1997, vol. 53, issue 2, 20-28

Abstract: Conventional studies of long-run returns on capital market assets, because of changes in valuation between the starting date and the ending date, obscure the basic return each asset earns. Consequently, both absolute returns and measured risk premiums are distorted. The basic return can be extracted by selecting widely separated dates with identical valuation levels. Over nearly 200 years, the analysis for equities produced 63 episodes averaging 35 years with a mean nominal basic return of 9.6 percent and standard deviation of 1.6 percent; 63 bond episodes averaging 43 years produced a mean nominal basic return of 4.9 percent and standard deviation of 2.3 percent. Equities revealed a tendency to regress to the mean over time, but no such tendency was apparent in the bond data. Thus, long-run equity returns were more predictable than long-run bond returns. This conclusion applies with even greater force to real returns.

Date: 1997
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.2469/faj.v53.n2.2068 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ufajxx:v:53:y:1997:i:2:p:20-28

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ufaj20

DOI: 10.2469/faj.v53.n2.2068

Access Statistics for this article

Financial Analysts Journal is currently edited by Maryann Dupes

More articles in Financial Analysts Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().