The latest Credit Suisse Global Investment Returns Yearbook, a comprehensive analysis of investment performance over the past 110 years, is out. Compiled by the bank and a group of academics from the London Business School, the report runs the rule over equity performance in 22 countries that comprise more than 80% of the global share market.
Since 1900, the equity risk premium—the return achieved above treasury bills—has averaged 4.4% per year, the report claims. There are reasons to believe that this long-term average overstates the prospects for equities in the years to come, the academics argue, with a premium on the order of 3.25% a more realistic expectation in the future. Although whether returns in the next 110 years will revert to their previous 110-year average makes for interesting debate, it also brings to mind the famous forecast of John Maynard Keynes: “In the long run, we are all dead.”