Triumph of the Optimists

Elroy Dimson; Paul Marsh; Mike Staunton

Published by Princeton University Press 2002

Triumph of the Optimists

101 Years of Global Investment Returns

Elroy Dimson , Paul Marsh and Mike Staunton

https://doi.org/10.1515/9781400829477

Overview
Contents

About this book

Investors have too often extrapolated from recent experience. In the 1950s, who but the most rampant optimist would have dreamt that over the next fifty years the real return on equities would be 9% per year? Yet this is what happened in the U.S. stock market. The optimists triumphed. However, as Don Marquis observed, an optimist is someone who never had much experience. The authors of this book extend our experience across regions and across time. They present a comprehensive and consistent analysis of investment returns for equities, bonds, bills, currencies and inflation, spanning sixteen countries, from the end of the nineteenth century to the beginning of the twenty-first. This is achieved in a clear and simple way, with over 130 color diagrams that make comparison easy.

Crucially, the authors analyze total returns, including reinvested income. They show that some historical indexes overstate long-term performance because they are contaminated by survivorship bias and that long-term stock returns are in most countries seriously overestimated, due to a focus on periods that with hindsight are known to have been successful.

The book also provides the first comprehensive evidence on the long-term equity risk premium--the reward for bearing the risk of common stocks. The authors reveal whether the United States and United Kingdom have had unusually high stock market returns compared to other countries. The book covers the U.S., the U.K., Japan, France, Germany, Canada, Italy, Spain, Switzerland, Australia, the Netherlands, Sweden, Belgium, Ireland, Denmark, and South Africa.

Triumph of the Optimists is required reading for investment professionals, financial economists, and investors. It will be the definitive reference in the field and consulted for years to come.

Author information

All three authors are at the London Business School. Elroy Dimson is Professor of Finance. Paul Marsh is Esmée Fairbairn Professor of Finance. Mike Staunton is Director of the London Share Price Database.

Reviews

Our favorite book on global stock market performance. . . . [It] epitomizes outstanding investment research. . . . Unless intelligent life is discovered on another planet and a stock market is found to have been operating there for some centuries, it is unlikely that much new data can be brought to bear on the issue of long-run stock returns. Triumph of the Optimists may well be the last word on the subject for some time to come.

A brilliant new book.---Jason Zweig, Time

By far the most important investment book in years. . . .It is the best and most complete source of data yet available. . . . If you spend an hour with it and don't learn anything worth the price then you're truly lousy at learning about markets. . . Right now, buying this book makes more sense than buying stocks.---Ken Fisher, Bloomberg Money

At the very least, this [book] suggests that the recent blind adherence to the cult of the equity needs to be questioned and that the strategic weighting of bonds in institutional portfolios should be increased.---Philip Coggan, Financial Times

"No investor can afford to risk a penny in the markets without studying this book and absorbing its fascinating lessons. That advice applies whether you are professional or amateur, a youngster or hardened from experience, bold or conservative. This book is history at its most challenging and illuminating. The facts are astonishing, the presentation dazzling, the analysis brilliant, and the lessons profound."—Peter L. Bernstein, author of Capital Ideas and Against the Gods

Connoisseurs of financial history will find plenty to enjoy in Triumph of the Optimists. . . . The evidence produced by Mr. Dimson and his colleagues is striking, [and]. . . these issues are more than just academic. . . . A provocative lesson.---Matthew Lynn, Financial Times

"This will become the definitive empirical basis for analysis of the world's capital markets over the twentieth century. It is an important work of scholarship; no one else has calculated the equity premium of a large number of countries over the long term. In doing so, the book contributes to the very lively debate on the magnitude of the equity premium and will make a splash."—William Goetzmann, Yale University

"Recent years have seen unprecedented public interest in the stock market, but there is a tendency for investors to concentrate on recent U.S. stock market performance. Progress in understanding financial markets requires a much longer timeframe and a global perspective. This book presents and analyzes data from many countries in a simple, standardized way that makes comparisons easy. It makes a number of extremely important points and goes well beyond simple summaries of average returns and historical volatilities to look at such issues as seasonality and industrial structure."—John Campbell, Harvard University

"This is an important addition to the investment literature and will be widely used by both the academic and business community. To have the scope of data and analysis contained in this book available in one place represents a major contribution and improvement over what is now available."—Martin J. Gruber, New York University

A model of how investor research should be carried out. . . . Like most great books, Triumph of the Optimists has us saying 'Wow!' and 'Unbelievable!' with startling regularity. . . . This is a book that belongs on every investor's bookshelf.---Victor Niederhoffer and Laurel Kenner, "Money" columnists, msn.com

Topics

Frontmatter Publicly Available Download PDF	i
Contents Publicly Available Download PDF	vii
Preface Requires Authentication Unlicensed Licensed Download PDF	xi
PART ONE: 101 years of global investment returns
Chapter 1. Introduction and overview Requires Authentication Unlicensed Licensed Download PDF	3
Chapter 2. World markets: today and yesterday Requires Authentication Unlicensed Licensed Download PDF	11
Chapter 3. Measuring long-term returns Requires Authentication Unlicensed Licensed Download PDF	34
Chapter 4. International capital market history Requires Authentication Unlicensed Licensed Download PDF	45
Chapter 5. Inflation, interest rates, and bill returns Requires Authentication Unlicensed Licensed Download PDF	63
Chapter 6. Bond returns Requires Authentication Unlicensed Licensed Download PDF	74
Chapter 7. Exchange rates and common-currency returns Requires Authentication Unlicensed Licensed Download PDF	91
Chapter 8. International investment Requires Authentication Unlicensed Licensed Download PDF	105
Chapter 9. Size effects and seasonality in stock returns Requires Authentication Unlicensed Licensed Download PDF	124
Chapter 10. Value and growth in stock returns Requires Authentication Unlicensed Licensed Download PDF	139
Chapter 11. Equity dividends Requires Authentication Unlicensed Licensed Download PDF	149
Chapter 12. The equity risk premium Requires Authentication Unlicensed Licensed Download PDF	163
Chapter 13. The prospective risk premium Requires Authentication Unlicensed Licensed Download PDF	176
Chapter 14. Implications for investors Requires Authentication Unlicensed Licensed Download PDF	195
Chapter 15. Implications for companies Requires Authentication Unlicensed Licensed Download PDF	211
Chapter 16. Conclusion Requires Authentication Unlicensed Licensed Download PDF	220
PART TWO: Sixteen countries, one world
Chapter 17. Our global database Requires Authentication Unlicensed Licensed Download PDF	227
Chapter 18. Australia Requires Authentication Unlicensed Licensed Download PDF	229
Chapter 19. Belgium Requires Authentication Unlicensed Licensed Download PDF	234
Chapter 20. Canada Requires Authentication Unlicensed Licensed Download PDF	239
Chapter 21. Denmark Requires Authentication Unlicensed Licensed Download PDF	244
Chapter 22. France Requires Authentication Unlicensed Licensed Download PDF	249
Chapter 23. Germany Requires Authentication Unlicensed Licensed Download PDF	254
Chapter 24. Ireland Requires Authentication Unlicensed Licensed Download PDF	259
Chapter 25. Italy Requires Authentication Unlicensed Licensed Download PDF	264
Chapter 26. Japan Requires Authentication Unlicensed Licensed Download PDF	269
Chapter 27. Netherlands Requires Authentication Unlicensed Licensed Download PDF	274
Chapter 28. South Africa Requires Authentication Unlicensed Licensed Download PDF	279
Chapter 29. Spain Requires Authentication Unlicensed Licensed Download PDF	284
Chapter 30. Sweden Requires Authentication Unlicensed Licensed Download PDF	289
Chapter 31. Switzerland Requires Authentication Unlicensed Licensed Download PDF	294
Chapter 32. United Kingdom Requires Authentication Unlicensed Licensed Download PDF	299
Chapter 33. United States Requires Authentication Unlicensed Licensed Download PDF	306
Chapter 34. World Requires Authentication Unlicensed Licensed Download PDF	311
References Requires Authentication Unlicensed Licensed Download PDF	316
About the Authors Requires Authentication Unlicensed Licensed Download PDF	331
Index Requires Authentication Unlicensed Licensed Download PDF	333

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