Stocks In The Really Long Run

While we discuss stock returns for a fairly long historical period in the textbook, what about the really long run? Global Financial Data has constructed a World Index that extends back to 1601! When evaluated over four distinct economic regimes, total stock returns have varied from 5.05 percent to 9.98 percent and dividends yields have varied widely as well. The equity risk premium has also varied significantly, from .87 percent to 3.02 percent. Over the past 318 years, the equity risk premium has averaged 1.46 percent. Of course, we should caution that this is not a definitive risk premium going forward. For anyone interested in stock market history, we would recommend a look.