Stocks, Bonds, Bills, and Inflation: Year-by-Year Historical Returns (1926-1974)

Abstract

In 1964, Lawrence Fisher and James H. Lorie published in this Journal their classic study, Rates of Return on Investments in Common Stocks.' In 1968, they extended their study to include all yearly holding period returns from 1926 to 1965.2 These two articles prompted a widespread interest in the long-run behavior of stock market returns. Motivated by their example, we present in this paper year-by-year historical rates of return for five major classes of assets in the United States. In a companion paper forthcoming in this Journal,3 we show how to use the historical data in simulating future return distributions for the same five asset classes. The five asset classes included in this study are (1) common stocks, (2) long-term U.S. government bonds, (3) long-term corporate bonds, (4) U.S. Treasury bills, and (5) consumer goods (inflation). For each asset we present total rates of return which reflect dividend or interest income as well as capital gains or losses. In addition to the five basic series listed above, we present seven derived series. These derived series represent the component parts of asset returns. They include real (inflation-adjusted) returns for the first four basic series. They also include a series measuring the net return from investing in common stocks rather than bills, the net return from investing in long-term government bonds rather than bills, and the net return fromh investing in long-term corporate bonds rather than long-term government bonds.