Stocks for the Long Run? Evidence from a Broad Sample of Developed Markets

81 Pages Posted: 3 Jun 2020 Last revised: 19 Jan 2021

See all articles by Aizhan Anarkulova

Aizhan Anarkulova

University of Arizona, Eller College of Management, Department of Finance, Students

Scott Cederburg

University of Arizona - Department of Finance

Michael S. O'Doherty

University of Missouri at Columbia - Department of Finance

Date Written: January 18, 2021

Abstract

We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivor and easy data biases that plague other work in this area. A bootstrap simulation analysis implies substantial uncertainty about long-horizon stock market outcomes, and we estimate a 12% chance that a diversified investor with a 30-year investment horizon will lose relative to inflation. The results contradict the conventional advice that stocks are safe investments over long holding periods.

Keywords: Long-horizon stock returns, loss probability, survivor bias, easy data bias

JEL Classification: C15, C58, G10, G11, G12, G15, G17, N20

Suggested Citation

Anarkulova, Aizhan and Cederburg, Scott and O'Doherty, Michael S., Stocks for the Long Run? Evidence from a Broad Sample of Developed Markets (January 18, 2021). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3594660 or http://dx.doi.org/10.2139/ssrn.3594660

Aizhan Anarkulova

University of Arizona, Eller College of Management, Department of Finance, Students ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ 85721
United States

Scott Cederburg (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Michael S. O'Doherty

University of Missouri at Columbia - Department of Finance ( email )

Robert J. Trulaske, Sr. College of Business
401 Cornell Hall
Columbia, MO 65211
United States

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