New research from Credit Suisse and London Business School in the Credit Suisse Global Investment Returns Yearbook 2014


International evidence from 1900-2014 provides new insights on investing in emerging markets and growth economies.

Zurich,  February 12, 2014 The Credit Suisse Global Investment Returns Yearbook and Credit Suisse Global Investment Returns Sourcebook are published today. The authors are Elroy Dimson, Paul Marsh, and Mike Staunton of London Business School.

Published by the Credit Suisse Research Institute in collaboration with London Business School, the 2014 Yearbook examines the investment performance of emerging markets over the last 114 years, and explores trading strategies in the emerging world. It revisits the authors’ finding, in their widely-cited book Triumph of the Optimists, that stock returns fail to reflect economic growth, and presents new evidence and explanations for this puzzle.

The 2014 Sourcebook reports the latest risk premium estimates for international stock and bond markets, and the performance to end-2013 from style factors such as size, value and growth, income, and momentum.

Giles Keating, Head of Research and Deputy Global CIO for Private Banking and Wealth Management at Credit Suisse, said: “The recovery in developed world economies now appears to be well under way. However, there are concerns that some emerging countries will confront a more challenging future. In this context, the Credit Suisse Global Investment Returns Yearbook 2014 examines the relationship between GDP growth, stock returns and the long-run performance of emerging markets.”

Stefano Natella, Head of Global Securities Research for Investment Banking at Credit Suisse, said: “At a time when investors are confronted by the prevailing volatility in capital markets, particularly emerging markets, the data in the Yearbook, now stretching back 114 years and spanning 23 countries, provides investors a unique perspective with which to make informed asset allocation decisions.”

2014 Yearbook
The Yearbook comprises three articles, together with profiles of 23 national and three regional markets. It covers the five main asset classes, with an annual dataset that runs from 1900 to the present day. The 2014 Yearbook incorporates four countries that entered the study for the first time in 2013–14: Austria, Portugal, China, and Russia. The inclusion of China and Russia, where investors lost everything through state expropriation, allows the authors to explore the impact of survivorship bias, and to estimate the long-run, worldwide equity risk premium on a survivorship-free basis.

Emerging markets revisited: After exceptional performance during the first decade of the 21st century, emerging market equities have recently suffered setbacks. The first article in the 2014 Yearbook presents an evidence-based view of the performance of emerging markets. The authors estimate the longest possible record of emerging market performance, covering stock market history since 1900. They find that the long-term (114-year) equity risk premium for a US investor in emerging markets was 3.4%, as compared to 4.3% for developed markets. However, this underperformance can be traced back to the distant 1940s, and the authors expect superior returns in the future, in line with the higher risk of emerging markets. They show that despite the popular conception, contagion is not the norm during emerging market crises. In contrast, crises originating in developing markets have proved far more contagious. They show that the value effect has been strong both within emerging markets and as the basis for a successful rotation strategy between markets. They document the continuing diversification benefits from emerging markets, and assert that the recent turn of sentiment against emerging markets seems overly pessimistic from the perspective of a long-term investor.

The growth puzzle: The second article revisits three controversial findings relating to economic growth and stock market returns. In their 2002 book, Triumph of the Optimists, the authors had found that in a cross-section of countries, long-term equity returns were inversely related to per capita GDP growth; in their 2010 Yearbook, they had found a negative relationship over time between past GDP growth and stock market performance; and finally, they had found that real dividend growth was slower than national economic growth. The 2014 Yearbook re-examines this puzzling evidence and offers some potential explanations. The authors show that population flows tend to reflect aggregate economic growth, so that GDP increases are typically spread over an enlarged population. They find that economies rarely maintain a high rate of uninterrupted growth over a sequence of years, and setbacks are commonplace. Though difficult for investors to capture in portfolio returns, they show that stronger GDP growth is generally good for investors. The authors warn against chasing the shares of countries that have historically grown fast. However, they also show that perfect forecasts of future GDP changes would be very valuable to investors, while cautioning that it is hard to make accurate predictions of changes that are not already discounted in stock prices.

A behavioural take on investor returns: The third article is by Michael Mauboussin of the Credit Suisse Research Institute. The author points out that the predisposition of investors to buy after a market rise and to sell after a drop means that their asset-weighted returns are below the time-weighted returns of the funds in which they invest. In line with the long-term focus of the Yearbook, Mauboussin argues that investors can counterbalance this tendency by making predictions that place more weight on past results and less on recent outcomes.

2014 Sourcebook
Now covering 26 markets, the Sourcebook examines risk over the long run and the historical extremes of investment performance. It documents the global long-term and shorter-term rewards for equity and bond investing, and presents the detailed 114-year dataset that underpins the Credit Suisse Global Investment Returns Yearbook. The authors report that, notwithstanding a strong recovery since 2009, equities have mostly disappointed since the start of 2000. However, over the long run, they have beaten inflation, bonds and cash in every country with a continuous 114-year history.

The Sourcebook also investigates the impact of investment styles on portfolio performance, emphasizing size, value, income and momentum effects in stock returns. The authors report a size premium (the amount by which smaller companies outperform larger ones) that has been positive over long intervals and many countries; a value premium (the amount by which value stocks outperform growth stocks) that has been larger than the size premium; an income premium (the amount by which high-yielding stocks outperform low-yielding stocks) that has been larger than the value premium; and a momentum premium (the amount by which past winners outperform past losers) that is largest of all.

Obtaining copies
The Yearbook is available as a free download here. The Sourcebook is a hard-copy publication and can be sent only by post. Copies of both publications may be requested by journalists from the press contacts below.

Charts and analysis
For charts or graphics, contact edimson@london.edu, pmarsh@london.edu, or mstaunton@london.edu


  • Sofia Rehman, Credit Suisse Media Relations, Tel. +44 (0)20 7883 7373, sofia.rehman@credit-suisse.com
  • Media Relations Credit Suisse AG, +41 844 33 88 44, media.relations@credit-suisse.com
  • Joanna Hughes, London Business School, Tel. +44 (0)20 7000 7112, jhughes@london.edu@london.edu
Credit Suisse Research Institute
The Credit Suisse Research Institute identifies and provides insights on global themes and trends. The objective of the Credit Suisse Research Institute is to provide clients with leading-edge advice by leveraging internal and external expertise, thus reinforcing Credit Suisse’s integrated global bank approach. The Institute conducts research on new fundamental topics, working with some of the world’s leading experts, academics and institutions and Credit Suisse’s global network of 400 analysts, and makes this available throughout the Bank for the business units to create innovative products, solutions and services for Credit Suisse’s clients.

Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‘Credit Suisse’). As an integrated bank, Credit Suisse is able to offer clients its expertise in the areas of private banking, investment banking and asset management from a single source. Credit Suisse provides specialist advisory services, comprehensive solutions and innovative products to companies, institutional clients and high net worth private clients worldwide, and also to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,000 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.

London Business School
London Business School’s vision is to have a profound impact on the way the world does business. The School is consistently ranked among the best in the world for its programmes. It was ranked number one internationally for the full-time MBA programme*. In research, the School is ranked top ten and holds the highest average research score of any UK academic institution**.

The School’s faculty, from over 30 countries, is grouped into seven subject areas : Accounting, Economics, Finance; Management Science and Operations, Marketing, Organisational Behaviour and Strategy and Entrepreneurship.

The School awards over 1,000 degrees every year, across MBA, Executive MBA, Masters in Finance, Masters in Management, Sloan Fellow and PhD programmes. With a presence in four international cities – London, New York, Hong Kong and Dubai – the School is well positioned to equip students from more than 100 countries with the tools needed to operate in today’s business environment. Students further benefit from the School’s 36,000 alumni from more than 130 countries who provide a wealth of knowledge, business experience and worldwide networking opportunities.

The award-winning*** Executive Education team offers a portfolio of over 25 open programmes as well as custom-designed programmes developed to meet the specific needs of individuals and their organisation. Annually, over 9,000 participants attend executive programmes that are led by many of the world’s leading business thinkers.


Media Contacts:

Anne McGregor
Media Executive
E: amcgregor@london.edu
T: + 44 (0) 207 000 7111

* 2013 Forbes international MBA ranking, 2012 Bloomberg BusinessWeek international MBA ranking and Financial Times MBA 2009, 2010 and 2011 rankings
** Research Assessment Exercise (RAE) 2008
***London Business School was recently awarded the 2013 EFMD Excellence in Practice Award for its 10-year partnership with Danone.

The Credit Suisse Global Investment Returns Yearbook 2014 draws on the Dimson-Marsh-Staunton database, which now covers 114 years of investment returns for all the main asset categories in Australia, Austria, Belgium, Canada, China, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Russia, South Africa, Spain, Sweden, Switzerland, the UK, the US, and three continental and worldwide indexes. The Credit Suisse Global Investment Returns Yearbook 2014 contains the three papers described above, plus a summary of long-run investment performance for every Yearbook market. Yearbook: A4 full-color glossy, hard-copy or PDF, 67 pages, 31 chapters, 110 figures/tables. ISBN 978-3-9524302-0-0.

The Credit Suisse Global Investment Returns Sourcebook 2014 contains fully up-to-date information on long-run capital market history for 23 countries and three regions. Review chapters summarize the long-run global evidence on (i) risk and return from stocks, bonds, bills, inflation and currencies; (ii) the equity risk premium and maturity premium; and (iii) investment style, size, value, income, and momentum. The “country” chapters then each provide six pages of detailed statistics on investment returns for stocks, bonds, bills, inflation, currencies and risk premiums, in each of the 26 markets. Sourcebook: A4 color, perfect-bound only, 224 pages, 31 chapters, 152 charts, 85 tables, 145 references. ISBN 978-3-9524302-1-7.

This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.

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We caution you that the foregoing list of important factors is not exclusive. When evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, including the information set forth in “Risk Factors” in I – Information on the company in our Annual Report 2012.

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