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Stock market charts you never saw (2021)

54 Pages

Posted: 11 Oct 2017

Last revised: 17 Mar 2021

Date Written: March 17, 2021

Abstract

Investors have seen countless charts of US stock market performance which start in 1926 and end near the present. But US trading long predates 1926, and the foreshortened perspective that results from a focus on post-1926 data can be misleading. To compound the problem, visual and arithmetic frailties, as catalogued in behavioral finance, make it difficult for investors to draw appropriate inferences from long-term records of performance. As a partial corrective, this paper displays a novel set of charts, with some rooted in the 19th rather than the 20th century, and others ending well before the present. The goal is to challenge shibboleths about the expected outcomes of buy-and-hold stock market investing, and to raise questions about the expected performance of stocks versus bonds over long periods. [This paper has been partially replaced by later work. See revision notes that follow this abstract.]

Keywords: Historical Stock Market Returns, Equity Premium, 19th Century, stocks for the long run

JEL Classification: G12, N21

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