Annual Rates of Return, 1926-1995, Estimated by Ibbotson Associates
from Brigham And Houston
| Security |
Annual Rate of Return |
Standard Deviation of Return |
| Small stocks | 17.7 |
34.4 |
| Large Company Common stocks | 12.5% |
20.4% |
| Long-term corporate bonds | 6.0 |
8.7 |
| Long-term government bonds | 5.5 |
9.2 |
| Treasury bills | 3.8 |
3.3 |
| Rate of inflation | 3.2 |
4.6 |
| Source: Stocks, Bonds, Bills, and Inflation 1996 Yearbook (Chicago, Ill.: Ibbotson Associates, 1996). (Data in the SBBI Yearbook updated annually.) | ||
Selected Correlation Coefficients for Returns from Various Alternative Investments
from Investments by Herbert B. Mayo
Correlation Coefficient |
Time Period |
|
U.S. common stocks and treasury bills |
-0.05 |
1926-1992 |
U.S. common stocks and long-term government bonds |
0.14 |
1926-19921 |
U.S. common stocks and Japanese stocks |
0.28 |
1970-1990 |
U.S. common stocks and Mexican stocks |
0.16 |
1978-1988 |
U.S. common stocks and U.S. real estate |
0.05 |
1979-1993 |
Average, Highest, and Lowest Returns: 1945-1995 and 1980-1995
from Investments by Herbert B. Mayo
| 1945-1995 | 1980-1995 | ||
| Common stocks | average return | 12.4% | 15.8% |
| highest return | 52.6% (1954) | 37.4% (1995) | |
| lowest return | -26.5% (1974) | -4.9% (1981) | |
| Small stocks | average return | 14.7% | 15.6% |
| highest return | 83.6% (1967) | 44.6% (1991) | |
| lowest return | -30.9% (1973) | -9.3% (1988) | |
| Rates of inflation | Average | 4.3% | 4.4% |
| Highest | 18.2% (1945) | 12.4% (1980) | |
| Lowest | 0.4% (1955) | 1.1% (1986) | |
| Source: Stocks, Bonds, Bills, and Inflation 1996 Yearbook (Chicago, Ill.: Ibbotson Associates, 1996). | |||
For now you can ignore the computation column, but the rest is relevant to what we have been looking at with respect to historical returns.
The Coverage and Computation of Selected Aggregate Measures of U.S. Stock Markets
from Investments by Herbert B. Mayo
Market Measure |
Coverage |
Computation |
||
Dow Jones Industrial Average |
30 large industrial firms |
Price-weighted arithmetic average |
||
Standard & Poor’s 500 stock index |
500 actively traded stocks (400 industrial, 20 transportation, 40 utility, and 40 financial firms) |
Value weighted |
||
Standard & Poor’s 400 stock index |
400 industrial companies |
Value weighted |
||
Standard & Poor’s 100 stock index |
100 "blue-chip" stocks on which options are traded |
Value weighted |
||
Standard & Poor’s MidCap index |
400 medium-sized firms with market values (stock price times number of shares outstanding) between $300 million and $3 billion |
Value weighted |
||
NYSE composite index |
All stocks listed on the NYSE |
Value weighted |
||
Amex index |
All stocks listed on the Amex |
Value weighted |
||
Value Line average |
Approximately 1,700 stocks covered by the Value Line Investment Survey |
Equal-weighted geometric average |
||
National Association of Security Dealers index |
3,000 over-the-counter stocks |
Value weighted |
||
Wilshire 5000 index |
Approximately 6,000 NYSE, Amex, and Nasdaq stocks |
Value weighted |
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