Stock Trading

The Rate of Return on Everything

Posted by Kristjan Kullamägi
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There’s an interesting study from several years ago that looked at the returns of some major asset classes over the past 150 years (where there is data).
One of the main takeaways from the study was that higher risk does not equal higher return, as housing showed slightly better overall returns with less volatility than equities.
The standard deviation was 10% from housing and 22% for equities.

Trends in Real Returns on Equity and Housing

The interesting thing is that bonds had similar volatility to housing yet much less returns.
Why did housing and equities perform the best? Because both are cash flow generating assets, not only appreciating in price, but also paying rent and dividends.

Sources:
https://academic.oup.com/qje/article/134/3/1225/5435538
https://qz.com/1170694/housing-was-the-worlds-best-investment-over-the-last-150-years/

2 thoughts on “The Rate of Return on Everything

  1. Nor

    Hello Kris, greetings from SF Bay Area. Big fan of your streams. If you’re not already familiar with the CS annual GIRY reports, they’re a treasure trove of long term asset class returns and observations. One of my favorite macro research sources. Each year there’s a different theme, 2019 was Emerging Markets but they often do very long term comparisons on various other global asset classes as well: https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/csri-summary-edition-credit-suisse-global-investment-returns-yearbook-2019.pdf

    1. Kristjan Kullamägi

      Thank you! I am aware of the CS reports, going to dig in the one you linked. Thanks!

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