A simple return attribution model is used to parse market returns over various time frames.
Did you know that from the US equity market low at the end of February 2009 to December 31, 2013, the S&P 500 (in US dollars) has generated a total return of 178.9% or 23.6% annuallized? While 2.3% annually has come from dividends, and 5.1% has come from nominal dividend growth, dividend revaluation has generated returns of 15.1% annualized, or 64% of the total, as yields have fallen from 3.8% to 1.9%.
Several longer articles are published here, usually in response to important market events or ongoing questions and discussions. Chart Essays are short essays based on a chart or graph of interest, used to` explain an investment concept or to discuss a market issue.
This article was written as an antidote to "early optimism" as investors looked for an equity market bottom in November, 2008. A longer-term valuation perspective was developed, using Schiller's long-term real P/E ratio. While equities certainly looked more attractive by the end of November, 2008, there was still reason to believe that the market downturn could continue.
This essay shows the dramatic effect that currency exposures can have on your portfolio returns. Investors must be aware of this, and must monitor the returns to their foreign investments in their home currencies.
This essay shows another example of how foreign currency exposures can affect your investment returns, and shows the impact of using currency hedging to offset some of the effects of currency exposure.
This essay looks at the impact of dividends over the long term, using US equity market history. The concept of total return versus price return are introduced, the impact of inflation on returns is examined, and the concept of real return — return after inflation — is introduced.
This essay illustrates how diversification across asset classes — psecifically adding bonds to your portfolio — could have cushioned recent volatility in equity markets.
Structured Capital presents a book by Tim Appelt:
Historical analysis of long-term global equity and bond returns is used to develop an analytical framework for a historical attribution of returns. In turn this attribution approach is used to develop expectations of future returns that acknowledge the past but take into account current market conditions.