This blog covers the general topic of financial markets.

US and France Comparison: 1871 - 2007

first posted: 2018-12-25 08:11:57.009021

With an annual average return of 5% over inflation but a standard deviation of 15%, the statistical uncertainty on the return is 3 times larger than the variable to be measured, and no useful conclusion can be made from observing the stock market over a 10 years only. Over a much longer period of 100 years, as the standard deviation is reduced by a factor 10, and long term returns measurement is subject to a standard deviation of 1.5% only.

In his 2011 thesis at Orleans University found also here, David Le Bris compares the stock market performance for France and US for the period 1871-2007.

We see that investment in France made sense compared to the US until 1913. It has been 105 years since it no longer makes sense to invest in France. Before World War I, the return/risk ratio (mean/standard dev in table 1) was slightly advantageous in France. While return was lower for French investments, volatility was much lower, so that investing with leverage in France would produce higher returns for comparable risk.

Since 1913, it has become much riskier to invest in France, for much less return. It does not make sense to invest in stocks France. The thesis also covers bonds, where the case is even stronger as inflation led to very negative returns on French bonds.


The result of 100 years of underperformance in terms of rate of return and volatility is underperformance on such a scale that a log scale is required to visualize it. You see that french investments underperformed US investments by a factor 100.


It turns out that Keynes advocacy of the euthanasia of the rentier was applied much more thoroughly in France. The problem is more than 100 years old, it predates the social unrest of 1936 or 1968. French people got used to a stronger and more authoritarian State than Americans.