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Triumph of the Optimists:
101 Years of Global Investment Returns
Elroy Dimson, Paul Marsh, & Mike Staunton

Book Description | Reviews
Chapter 1 [HTML] or [PDF format] | Chapter 4 [PDF only]

TABLE OF CONTENTS:

Preface xi

Part One: 101 years of global investment returns 1

Chapter 1 Introduction and overview 3
1.1 Need for an international perspective 3
1.2 The historical record 5
1.3 Inside the markets 7
1.4 The equity premium 8
1.5 Sixteen countries, one world 10

Chapter 2 World markets: today and yesterday 11
2.1 The world's stock markets today 11
2.2 The world's bond markets today 14
2.3 Why stock and bond markets matter 18
2.4 The world's markets yesterday 19
2.5 The US and UK stock markets: 1900 versus 2000 23
2.6 Industry composition: 1900 versus 2000 23
2.7 Stock market concentration 28
2.8 Summary 32

Chapter 3 Measuring long-term returns 34
3.1 Good indexes and bad 34
3.2 Index design: a case study 36
3.3 Dividends, coverage, and weightings 38
3.4 Easy-data bias in international indexes 40
3.5 Measuring inflation and fixed-income returns 43
3.6 Summary 44

Chapter 4 International capital market history 45
4.1 The US record 45
4.2 The UK record 48
4.3 Stock market returns around the world 50
4.4 Equities compared with bonds and bills 51
4.5 Investment risk and the distribution of annual returns 54
4.6 Risk, diversification, and market risk 56
4.7 Risk comparisons across asset classes and countries 59
4.8 Summary 61

Chapter 5 Inflation, interest rates, and bill returns 63
5.1 Inflation in the United States and the United Kingdom 63
5.2 Inflation around the world 65
5.3 US treasury bills and real interest rates 68
5.4 Real interest rates around the world 71
5.5 Summary 72

Chapter 6 Bond returns 74
6.1 US and UK bond returns 74
6.2 Bond returns around the world 79
6.3 Bond maturity premia 81
6.4 Inflation-indexed bonds and the real term premium 84
6.5 Corporate bonds and the default risk premium 87
6.6 Summary 89

Chapter 7 Exchange rates and common-currency returns 91
7.1 Long-run exchange rate behavior 91
7.2 The international monetary system 93
7.3 Long-run purchasing power parity 95
7.4 Deviations from purchasing power parity 96
7.5 Volatility of exchange rates 98
7.6 Common-currency returns on bonds and equities 100
7.7 Summary 103

Chapter 8 International investment 105
8.1 Local market versus currency risk 105
8.2 A twentieth century world index for equities and bonds 108
8.3 Ex post benefits from holding the world index 111
8.4 Correlations between countries 114
8.5 Prospective gains from international diversification 117
8.6 Home bias and constraints on international investment 120
8.7 Summary 123

Chapter 9 Size effects and seasonality in stock returns 124
9.1 The size effect in the United States 124
9.2 The size effect in the United Kingdom 126
9.3 The size effect around the world 129
9.4 The reversal of the size premium 131
9.5 Seasonality and size 135
9.6 Summary 138

Chapter 10 Value and growth in stock returns 139
10.1 Value versus growth in the United States 139
10.2 Value and growth investing in the United Kingdom 142
10.3 The international evidence 145
10.4 Summary 148

Chapter 11 Equity dividends 149
11.1 The impact of income 149
11.2 US and UK dividend growth 152
11.3 Dividend growth around the world 154
11.4 Dividend growth, GDP growth, and real equity returns 155
11.5 Dividend yields around the world and over time 157
11.6 Disappearing dividends 158
11.7 Summary 161

Chapter 12 The equity risk premium 163
12.1 US risk premia relative to bills 163
12.2 Worldwide risk premia relative to bills 166
12.3 US risk premia relative to bonds 169
12.4 Worldwide risk premia relative to bonds 171
12.5 Summary 173

Chapter 13 The prospective risk premium 176
13.1 Why the risk premium matters 177
13.2 How big should the risk premium be? 179
13.3 Measuring the premium 181
13.4 Arithmetic and geometric premia 183
13.5 The changing consensus 185
13.6 History as a guide to the future 188
13.7 Expectations of the risk premium 190
13.8 Summary 193

Chapter 14 Implications for investors 195
14.1 Market risk in the twenty-first century 195
14.2 Inferences from other markets 199
14.3 What does the future hold? 202
14.4 Implications for individual investors 204
14.5 Implications for investment institutions 207
14.6 Summary 209

Chapter 15 Implications for companies 211
15.1 The cost of capital 211
15.2 Corporate investment decisions 215
15.3 Corporate financing decisions 217
15.4 Summary 219

Chapter 16 Conclusion 220
16.1 Long-term returns 220
16.2 Key messages 222
16.3 Conclusion 224

Part Two: Sixteen countries, one world 225

Chapter 17 Our global database 227
Chapter 18 Australia 229
Chapter 19 Belgium 234
Chapter 20 Canada 239
Chapter 21 Denmark 244
Chapter 22 France 249
Chapter 23 Germany 254
Chapter 24 Ireland 259
Chapter 25 Italy 264
Chapter 26 Japan 269
Chapter 27 The Netherlands 274
Chapter 28 South Africa 279
Chapter 29 Spain 284
Chapter 30 Sweden 289
Chapter 31 Switzerland 294
Chapter 32 United Kingdom 299
Chapter 33 United States 306
Chapter 34 World 311

References 316
About the authors 331
Index 333

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File created: 7/11/2014

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