From: Michael S. Lorrey (
Date: Thu Jun 08 2000 - 13:13:20 MDT

Laeeth Is'Harc wrote:
> Those numbers sound about right for the US market. It's worth noting though
> that basing your strategy solely on US returns neglects survivorship bias.
> It would have been hard in 1920 to know that the US economy would have
> survived the major disruptive events of the last century largely unscathed
> (in contrast to Germany, Poland, Argentina etc).
> If you try to adjust for this, the historical equity premium looks much
> lower - see "A Century of Global Stock Markets", a WP by Goetzmann and
> Jorion or the review article at:

I think though that a preference for a stable long term market, like that of the
US, helps attract the capital that feeds its higher average growth. Reading the
article I'd also note that the worst performing countries are those that
practice widespread socialism or other political tyranny. Apparently Rouwenhorst
agrees, seeing as how he has divvied up the time lines of some countries between
socialist/tyrannical phases, and relatively freer eco-political phases. This all
follows the adages of 'success is its own reward', 'doing well by doing good',
that sort of thing. People want to put their money where it is safe, and that
preference can feed its own growth.

I think one of the reasons why todays stock market has seen so much growth and
volatility is that most of the generation of people who lived through the market
crash in 1929 are now dead, so there are fewer risk averse people in the market
than previously. My 88 year old grandmother was a teen ager then, and has been
so financially paranoid that until recently she kept all her money in bonds and

Mike Lorrey

This archive was generated by hypermail 2b29 : Thu Jul 27 2000 - 14:12:54 MDT