Statistiche › Rendimenti di lungo periodo › Stocks over the long run
Equity variance per year is 45 per cent higher over thirty years than over one
| Orizzonte | Predictive variance per year against one year |
|---|---|
| Dieci anni | higher than one year, no figure published |
| Venti anni | no figure published |
| Thirty years | about 45% above |
| Fifty years | about 80% above |
| The same under an alternative specification | 1.4 to 1.5 times |
Predictive variance per year for an investor who does not know the true parameters of the return process, relative to the one year horizon, on 206 years of annual real returns from 1802 to 2007 with a quarterly robustness sample from 1952 to 2006. The paper publishes exact figures only at thirty and fifty years. It reports a 63 per cent posterior probability that the true thirty year unconditional variance ratio is below one and a 76 per cent probability for the conditional version.
On 206 years of annual data, the realised thirty year variance ratio is 0.28, which looks like equities getting safer with horizon. The forward looking variance an investor faces, who does not know the true parameters, is 45 per cent higher.
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