Beyond Siegel

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Peter23454
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Beyond Siegel

Post by Peter23454 »

Hi all,
i think the table from Siegel's "Stocks for the Long Run" where he provides the average annualized real returns for five asset classes is hugely useful:
stocks: 6.6%
bonds: 3.6%
Bills: 2.7%
Gold: 0.7%
US dollar: -1.4%

My question in this post is: does anyone have relevant, high-quality data to expand this table into other asset classes, such as real-estate, private equity, and others...?

Peter
Robot Monster
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Re: Beyond Siegel

Post by Robot Monster »

Historical Returns of the Market Portfolio link

Includes historical returns of real estate, commodities, bonds.
MarkRoulo
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Re: Beyond Siegel

Post by MarkRoulo »

Peter23454 wrote: Tue Jun 21, 2022 2:33 am Hi all,
i think the table from Siegel's "Stocks for the Long Run" where he provides the average annualized real returns for five asset classes is hugely useful:
stocks: 6.6%
bonds: 3.6%
Bills: 2.7%
Gold: 0.7%
US dollar: -1.4%

My question in this post is: does anyone have relevant, high-quality data to expand this table into other asset classes, such as real-estate, private equity, and others...?

Peter
You want to pay attention to the consistency of these returns, too.

From 1946 - 1981 bond real returns were negative (about -3% annualized using Siegel's numbers as reported by Wiki).
From 1982 - 2001 bond real returns were +8.5% annualized

With lots of trending.

If 3.6% average is a single coin flip of either -3% or +8.5% and you only get one flip that is very different from
a range of 3% - 4%.
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nisiprius
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Re: Beyond Siegel

Post by nisiprius »

It would be far more useful if it had ± ranges around each of those numbers.
Last edited by nisiprius on Tue Jun 21, 2022 6:54 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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nisiprius
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Re: Beyond Siegel

Post by nisiprius »

There is an article entitled "The Rate of Return on Everything, 1870-2015." by Oscar Jorda & al. I'm not at home and not well prepared to check out what its availability is.
Last edited by nisiprius on Tue Jun 21, 2022 6:54 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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retired@50
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Re: Beyond Siegel

Post by retired@50 »

nisiprius wrote: Tue Jun 21, 2022 1:45 pm There is an article ntitled "The Rate of Return on Everything, 1870-2015." by Oscar Jorda & al. I'm not at home and not well prepared to check out what its availability is.
See link for paper...
Link: https://economics.harvard.edu/files/eco ... s28533.pdf

Regards,
This is one person's opinion. Nothing more.
McQ
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Re: Beyond Siegel

Post by McQ »

Peter23454 wrote: Tue Jun 21, 2022 2:33 am Hi all,
i think the table from Siegel's "Stocks for the Long Run" where he provides the average annualized real returns for five asset classes is hugely useful:
stocks: 6.6%
bonds: 3.6%
Bills: 2.7%
Gold: 0.7%
US dollar: -1.4%

My question in this post is: does anyone have relevant, high-quality data to expand this table into other asset classes, such as real-estate, private equity, and others...?

Peter
When Jeremy Siegel first published Stocks for the Long Run thirty years ago, it stood alone as the first effort to look at returns on multiple assets over a two century span (US only). No more having to settle for "Since 1926 ..." or "since 1871 ..."

In my judgment it has not aged well. I spent a few years tearing out most of his 19th century data and upgrading it with a better historical record. Results are here: https://papers.ssrn.com/sol3/papers.cfm ... id=3805927, "Stocks for the Long Run? Sometimes Yes. Sometimes No."

Long story short:
1. his stock return estimate is high, especially during the 19th century, but not that bad for the two centuries combined. The biggest over-estimate comes pre-1871 (i.e., pre Shiller).
2. his bond estimate is a mess. He missed the fact that bond returns have gone through distinctly different regimes, with sustained multi-decade returns rather higher than his 3.6% and other stretches much lower. He didn't probe his bond sources deeply enough to understand their limits.
3. I think you can get a better inflation estimate pre-1913 from measuringworth.com

In general, you can’t download Siegel’s data series. You can mine, link in the paper.

See posts below for more on Global returns, which have often been quite different than Siegel’s values.
They that read the footnotes, they shall be saved; but they that pass over the appendices, they shall wander forever.
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Re: Beyond Siegel

Post by McQ »

retired@50 wrote: Tue Jun 21, 2022 1:53 pm
nisiprius wrote: Tue Jun 21, 2022 1:45 pm There is an article ntitled "The Rate of Return on Everything, 1870-2015." by Oscar Jorda & al. I'm not at home and not well prepared to check out what its availability is.
See link for paper...
Link: https://economics.harvard.edu/files/eco ... s28533.pdf

Regards,
An advantage of the Jorda et al. work: you can download their data and play with it yourself (dozens of series organized by country). Just keep in mind that their real estate data is technically, housing data, the imputed return from owning a personal residence, with the rent not paid equal to the income return. It is not based on any investable asset and not does not equal the commercial real estate return.

This chart is from a later paper, mostly focused elsewhere, which puts the Jorda et al. housing return data to work. It shows how different REIT returns have been relative to their housing returns series (p. 54 of https://papers.ssrn.com/sol3/papers.cfm ... id=4001986)

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Re: Beyond Siegel

Post by nisiprius »

Very tangentially... at one point, in one edition of Jeremy Siegel's Stocks for the Long Run, he provided a chart I cannot remember seeing anywhere else: a chart of cumulative, real, stock market total returns after taxes. There were several lines for several marginal tax rates, IIRC.

I've been looking all through the fifth edition--but it's an eBook edition and one things eBooks do not do is to let you riffle pages!--and I can't find it. Did I miss it?

If not, does anyone know of any similar chart anywhere?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Taylor Larimore
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Re: Beyond Siegel

Post by Taylor Larimore »

nisiprius wrote: Tue Jun 21, 2022 7:02 pm Very tangentially... at one point, in one edition of Jeremy Siegel's Stocks for the Long Run, he provided a chart I cannot remember seeing anywhere else: a chart of cumulative, real, stock market total returns after taxes. There were several lines for several marginal tax rates, IIRC.

I've been looking all through the fifth edition--but it's an eBook edition and one things eBooks do not do is to let you riffle pages!--and I can't find it. Did I miss it?

If not, does anyone know of any similar chart anywhere?
nisiprius:

I have the 1998 edition of Jeremy Siegel's "Stocks for the Long Run" with the "after taxes" chart. At the bottom of this chart he wrote something which I always remember:

"From a tax standpoint, there should be a clear preference for investors to receive capital gains over dividend income."

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Learn from the experience of others. It's cheaper."
"Simplicity is the master key to financial success." -- Jack Bogle
LFS1234
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Re: Beyond Siegel

Post by LFS1234 »

Taylor Larimore wrote: Tue Jun 21, 2022 7:49 pm
nisiprius wrote: Tue Jun 21, 2022 7:02 pm Very tangentially... at one point, in one edition of Jeremy Siegel's Stocks for the Long Run, he provided a chart I cannot remember seeing anywhere else: a chart of cumulative, real, stock market total returns after taxes. There were several lines for several marginal tax rates, IIRC.

I've been looking all through the fifth edition--but it's an eBook edition and one things eBooks do not do is to let you riffle pages!--and I can't find it. Did I miss it?

If not, does anyone know of any similar chart anywhere?
nisiprius:

I have the 1998 edition of Jeremy Siegel's "Stocks for the Long Run" with the "after taxes" chart. At the bottom of this chart he wrote something which I always remember:

"From a tax standpoint, there should be a clear preference for investors to receive capital gains over dividend income."

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Learn from the experience of others. It's cheaper."
I have the original 1994 edition of Siegel's book. Chapter 7 "Taxes and Stock Returns" contains a chart 7.2 "Total Nominal Return Indexes (Before and After Federal Tax 1802-1992) with data for "stocks", "bonds" and "gold/CPI". Is that the chart being discussed? There might be others.

Regarding Siegel's 1998 admonition to have a clear preference for capital gains over dividend income - this made sense in 1994 and in 1998, but ever since the 2003 tax act (JGTRRA), the federal tax rate for qualified dividends has been identical to that of capital gains.

Therefore, for those who consume their dividend income (as opposed to reinvesting it), it no longer makes any difference tax-wise if their income comes in the form of qualified dividends or capital gains. At least for now.
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Re: Beyond Siegel

Post by McQ »

nisiprius wrote: Tue Jun 21, 2022 7:02 pm Very tangentially... at one point, in one edition of Jeremy Siegel's Stocks for the Long Run, he provided a chart I cannot remember seeing anywhere else: a chart of cumulative, real, stock market total returns after taxes. There were several lines for several marginal tax rates, IIRC.

I've been looking all through the fifth edition--but it's an eBook edition and one things eBooks do not do is to let you riffle pages!--and I can't find it. Did I miss it?

If not, does anyone know of any similar chart anywhere?
Books.google.com confirms, per Taylor, that the search term "tax" is fruitful in the 1998 edition (2nd), and that Siegel shows some sensitivity to changing capital gains rates in the mid-20th century. But only snippets are available, you'll have to find and buy it on bookfinder.com to delve into the detail.

I wouldn't spend too much; I found the tax treatment in his 1992 FAJ article unsatisfying (http://efinance.org.cn/cn/fm/The%20Equi ... 201802.pdf) That paper and the JME the same year laid the foundation for the book; these peer reviewed papers have the footnotes lacking from (later) editions of the books.

In the FAJ he used the average tax rate, averaged across all the low income groups who could not have invested in financial assets along with the much smaller number, paying a much higher rate, who could. Brackets in the early 20th century could number almost two dozen, and the rate structure was steeply progressive, say 6% at the bottom to 90% at the top. Or more.

I tend to doubt Siegel included the Civil War era income tax; and I cannot be confident he navigated the changing dividend and capital gains rates, the regular income tax versus the surtax, the 1942 transition in Treasury taxation, yada yada. Not to speak of the New York income tax, or the earlier Massachusetts intangible property tax. Search terms on scholar.google.com like 'history dividend taxation' will be very fruitful if you decide to make this a project.

The year by year bracket and rate tables at the taxfoundation.org will also be a crucial resource: https://taxfoundation.org/historical-in ... -brackets/

Long story short: after-tax historical asset returns remain a green field. I entertained the thought of pursuing it myself. I still might; but I'd allocate six months of full-time work (retirement hours) if I got serious.

You are no less capable, if motivated; just don't assume that Siegel has already handed the results to you wrapped up in a bow, in a chart waiting to be found.
They that read the footnotes, they shall be saved; but they that pass over the appendices, they shall wander forever.
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Taylor Larimore
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Re: Beyond Siegel

Post by Taylor Larimore »

Bogleheads:

We sometimes forget that past performance does not equal future performance.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future."
"Simplicity is the master key to financial success." -- Jack Bogle
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