The Long-Horizon Returns of Stocks, Bonds, and Bills: Evidence from a Broad Sample of Developed Markets

90 Pages Posted: 18 Nov 2021

See all articles by Aizhan Anarkulova

Aizhan Anarkulova

University of Arizona, Eller College of Management, Department of Finance, Students

Scott Cederburg

University of Arizona - Department of Finance

Michael S. O'Doherty

University of Missouri at Columbia - Department of Finance

Date Written: November 15, 2021

Abstract

We characterize the joint distribution of long-horizon returns on domestic stocks, international stocks, bonds, and bills. We study 38 developed countries with a sample period of 1890 to 2019, and our data formation procedures mitigate survivor and easy data biases. Bootstrap estimates of the joint distribution reveal substantial uncertainty in asset payoffs and large real loss probabilities over a 30-year horizon for domestic stocks (13%), bonds (27%), and bills (37%). The distribution features joint tail risk, such that simultaneous real losses across multiple asset classes over long horizons are not rare. The potential losses are most pronounced when current asset prices are high.

Keywords: Long-horizon returns, loss probability, survivor bias, easy data bias

JEL Classification: C15, D31, G10, G11, G12, G15, G17, N20

Suggested Citation

Anarkulova, Aizhan and Cederburg, Scott and O'Doherty, Michael S., The Long-Horizon Returns of Stocks, Bonds, and Bills: Evidence from a Broad Sample of Developed Markets (November 15, 2021). Available at SSRN: https://ssrn.com/abstract=3964908 or http://dx.doi.org/10.2139/ssrn.3964908

Aizhan Anarkulova

University of Arizona, Eller College of Management, Department of Finance, Students ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ 85721
United States

Scott Cederburg (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Michael S. O'Doherty

University of Missouri at Columbia - Department of Finance ( email )

Robert J. Trulaske, Sr. College of Business
401 Cornell Hall
Columbia, MO 65211
United States

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