Long-run asset returns

Project researchers

Research summary

This survey brings together the rapidly growing evidence on how major asset classes have performed over the very long run. The authors review historical return premia on equities, government and corporate bonds, real estate and commodities, drawing on data that in some cases extend back to the early nineteenth century and beyond.

A central contribution is to show how sensitive long-run estimates are to data construction. The article highlights four key challenges: “easy-data” and survivorship biases (focusing on markets or periods that look good), lack of macro-consistency in index design, difficulties in replicating historical portfolios, and the frequent omission of income (dividends, coupons, rents) from return measures. The authors set out best-practice guidelines for building and using long-horizon datasets.

Using improved data, they revisit several classic questions. They confirm that the equity risk premium was exceptionally high in the twentieth century but much smaller in the nineteenth, and that the recent era of very low real bond yields is historically unusual. Evidence on the credit premium from corporate bonds is positive but modest and harder to measure. For housing, newer work suggests total real returns are lower than once thought, while a diversified portfolio of commodity futures appears to earn a small but persistent premium over cash.

For students, the key message is that long-run return estimates are powerful but fragile: understanding how the data are built is as important as the headline numbers when drawing lessons for asset pricing and long-term investment.

News and insights

Understanding market cycles through history, data and personal insight

Professor Elroy Dimson has for decades boosted our historical understanding of financial markets. He reflects on how he became hooked on financial data through an early sojourn into the corporate world, how markets history may judge artificial intelligence, and how his family’s wine business resonated in his research into collectibles.

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