The authors of this book present a comprehensive and consistent analysis of investment returns for equities, bonds, bills, currencies, and inflation spanning 16 countries from the end of the 19th century to the beginning of the 21st. This is achieved with over 130 color diagrams that make comparison easy Presents a comprehensive analysis of investment returns for equities, bonds, bills, currencies and inflation, spanning sixteen countries, from the end of the nineteenth century to the beginning of the twenty-first. This book also provides evidence on the long-term equity risk premium - the reward for bearing the risk of common stocks. Preface xi Part One: 101 years of global investment returns 1(224) Introduction and overview 3(8) Need for an international perspective 3(2) The historical record 5(2) Inside the markets 7(1) The equity premium 8(2) Sixteen countries, one world 10(1) World markets: today and yesterday 11(23) The world's stock markets today 11(3) The world's bond markets today 14(4) Why stock and bond markets matter 18(1) The world's markets yesterday 19(4) The US and UK stock markets: 1900 versus 2000 23(1) Industry composition: 1900 versus 2000 23(5) Stock market concentration 28(4) Summary 32(2) Measuring long-term returns 34(11) Good indexes and bad 34(2) Index design: a case study 36(2) Dividends, coverage, and weightings 38(2) Easy-data bias in international indexes 40(3) Measuring inflation and fixed-income returns 43(1) Summary 44(1) International capital market history 45(18) The US record 45(3) The UK record 48(2) Stock market returns around the world 50(1) Equities compared with bonds and bills 51(3) Investment risk and the distribution of annual returns 54(2) Risk, diversification, and market risk 56(3) Risk comparisons across asset classes and countries 59(2) Summary 61(2) Inflation, interest rates, and bill returns 63(11) Inflation in the United States and the United Kingdom 63(2) Inflation around the world 65(3) US treasury bills and real interest rates 68(3) Real interest rates around the world 71(1) Summary 72(2) Bond returns 74(17) US and UK bond returns 74(5) Bond returns around the world 79(2) Bond maturity premia 81(3) Inflation-indexed bonds and the real term premium 84(3) Corporate bonds and the default risk premium 87(2) Summary 89(2) Exchange rates and common-currency returns 91(14) Long-run exchange rate behavior 91(2) The international monetary system 93(2) Long-run purchasing power parity 95(1) Deviations from purchasing power parity 96(2) Volatility of exchange rates 98(2) Common-currency returns on bonds and equities 100(3) Summary 103(2) International investment 105(19) Local market versus currency risk 105(3) A twentieth century world index for equities and bonds 108(3) Ex post benefits from holding the world index 111(3) Correlations between countries 114(3) Prospective gains from international diversification 117(3) Home bias and constraints on international investment 120(3) Summary 123(1) Size effects and seasonality in stock returns 124(15) The size effect in the United States 124(2) The size effect in the United Kingdom 126(3) The size effect around the world 129(2) The reversal of the size premium 131(4) Seasonality and size 135(3) Summary 138(1) Value and growth in stock returns 139(10) Value versus growth in the United States 139(3) Value and growth investing in the United Kingdom 142(3) The international evidence 145(3) Summary 148(1) Equity dividends 149(14) The impact of income 149(3) US and UK dividend growth 152(2) Dividend growth around the world 154(1) Dividend growth, GDP growth, and real equity returns 155(2) Dividend yields around the world and over time 157(1) Disappearing dividends 158(3) Summary 161(2) The equity risk premium 163(13) US risk premia relative to bills 163(3) Worldwide risk premia relative to bills 166(3) US risk premia relative to bonds 169(2) Worldwide risk premia relative to bonds 171(2) Summary 173(3) The prospective risk premium 176(19) Why the risk premium matters 177(2) How big should the risk premium be? 179(2) Measuring the premium 181(2) Arithmetic and geometric premia 183(2) The changing consensus 185(3) History as a guide to the future 188(2) Expectations of the risk premium 190(3) Summary 193(2) Implications for investors 195(16) Market risk in the twenty-first century 195(4) Inferences from other markets 199(3) What does the future hold? 202(2) Implications for individual investors 204(3) Implications for investment institutions 207(2) Summary 209(2) Implications for companies 211(9) The cost of capital 211(4) Corporate investment decisions 215(2) Corporate financing decisions 217(2) Summary 219(1) Conclusion 220(5) Long-term returns 220(2) Key messages 222(2) Conclusion 224(1) Part Two: Sixteen countries, one world 225(91) Our global database 227(2) Australia 229(5) Belgium 234(5) Canada 239(5) Denmark 244(5) France 249(5) Germany 254(5) Ireland 259(5) Italy 264(5) Japan 269(5) The Netherlands 274(5) South Africa 279(5) Spain 284(5) Sweden 289(5) Switzerland 294(5) United Kingdom 299(7) United States 306(5) World 311(5) References 316(15) About the authors 331(2) Index 333