IDEAS home Printed from
   My bibliography  Save this paper

Evaluating A Buy and Hold Strategy for the S&P 500 Index


  • Tower, Edward
  • Gokcekus, Omer


In this paper, we calculate the real rate of return from purchasing the S&P 500 index from 1871 through 2001. We assume the investor purchases the index in January of each year and holds it forever, consuming dividends, but never selling the index itself or else selling it after its present value is dwarfed by the present value of the dividend flows. The calculations rest on best guesses about post 2000 dividends. These we infer from past behavior. The highest real return was 13.02% for a purchase in June 1932. The lowest was 2.88% for August 2000. The expected return for a purchase in January 2001 was 3.08%. To raise it to the 5% that we judge the minimum return necessary to maintain investor interest, the S&P 500 index would have had to fall by 53% from its January 2001 value of 1336 to 624.

Suggested Citation

  • Tower, Edward & Gokcekus, Omer, 2002. "Evaluating A Buy and Hold Strategy for the S&P 500 Index," Working Papers 02-01, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:02-01

    Download full text from publisher

    File URL:
    File Function: main text
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:02-01. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.