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Expect something sensible: Putting US returns in an international perspective

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  • Roelof Salomons

    (AEGON Asset Management)

Abstract

This paper examines unconditional long-run expected returns for US equity and bond markets and contrasts returns with those of four large economies. Earlier studies on the US are confirmed, and it is found that, as a result of repricing, actual equity returns have exceeded what could reasonably have been expected. As bonds returned less, the excess return on equity was spectacular. With the exception of the UK, investors in other countries were less fortunate. These results lend credibility to the argument that analysis using US historical data is overly comforting. Survivorship bias is clearly an issue. Based on current valuations, expected returns on US equities are low. Actual returns might be even lower.

Suggested Citation

  • Roelof Salomons, 2004. "Expect something sensible: Putting US returns in an international perspective," Journal of Asset Management, Palgrave Macmillan, vol. 5(3), pages 176-191, October.
    • Handle: RePEc:pal:assmgt:v:5:y:2004:i:3:d:10.1057_palgrave.jam.2240137
    DOI: 10.1057/palgrave.jam.2240137
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    Cited by:

    1. Roelof Salomons, 2008. "A Theoretical And Practical Perspective On The Equity Risk Premium," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 299-329, April.

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