This blog covers the general topic of financial markets.

Global Investment Return Yearbook 2018

first posted: 2019-10-01 11:04:25.745810

The summary yearbook published by Credit Suisse is available here and here.


Long Term Asset Returns

Developed market long run annualized performance is 8.4% whereas emerging market increased only 7.4% annually.

In the US, annualized nominal asset returns and inflation were as follow:

  • Equity: 9.6%
  • Bonds: 4.9%
  • Bills: 3.7%
  • Inflation: 2.9%

This is a best case return as the USA emerged unscathed from the two world wars. Many countries (Japan, Germany, Austria, ...) saw a differential of 6% between equity and bills and negative real returns for bonds and bills. This is consistent with Rinhardt and Rogoff finding that fiat currencies suffer hyperinflation within 50 years.

Equities outperform bonds and bills in all cases. The equity very strongly outperforms in all cases when real rates are between -2.1% and 9.4%. Risk premium goes down when real rate is above 9.4%. The 15% lowest real rates quantile (real rate below at -11%) corresponds to very negative equity performance where the investors would be well advised to move their investment to another country or to commodities.

Risk Premiums

The annualized risk premium of equity w.r. to bills is positive accross all countries. It ranges from 3% for stable counties to 6% for countries that were devastated by war.

This outperformance was accompanied by market 6 large crashes. Such large crashes happen worldwide. Germany and Japan lost 88% resp. 96% during WWII, other countries drawdown are maximum -60%.

Factor Returns

For the purpose of this study, the following factors were identified:

  • low vol
  • momentum
  • income
  • size
  • value

These different factors performance is only shown since 2008 and outperformance cannot be assessed given the annual returns variance and the shortness of the period involved.

Size effect is observed both in the US and UK, with micro-caps overperforming large cap by 3% in the US and by 6% in the UK.

Private Wealth


Looking at UHWI total net worth allocation:

  • 16% home and secondary
  • 6% collectibles
  • 23%: personal business
  • 24% real estate
  • 25% financial assets (bonds, stocks...)

The GIRY study then proceeds to see whether collectibles and real assets offer a good return.


Collectibles fared much below stocks in general over the 120 years period considered. Cars and wine saw the best appreciation.

Real Estate

Housing increased in value by 1.3% on average. It increased substantially in Australia 2.2%, UK 1.8% and Finland 1.7%, whereas the US saw only a 0.3% annual real increase in value. This performance is far below that of stocks.

Houses are much less lqidui but still less volatile, as the largest drawdown was 32% in the US.