Complete Guide To Corporate Finance
Capital Market History - Historical Record Of Stocks And Bonds
In the book "Triumph Of The Optimists: 101 Years Of Global Investment Returns" (2002), Elroy Dimson, Paul Marsh and Mike Staunton offer the most complete study of historical global market returns. The book documents market returns for 16 countries from 1900 to 2000. From this research, it is evident that three important changes took place in the global stock market in the last century: the United States achieved market dominance; the exchanges were consolidated; and secular sector rotation occurred. Unfortunately, understanding the past doesn't necessarily make predicting the markets' future any easier. Let's look at what happened in the past century and why some experts say history may not be destined to repeat itself.
To the Winner Go the Spoils
Unfortunately, until "Triumph Of The Optimists" was published, most of the available historical stock market data for the years prior to 1970 was only for the U.S. market. This isn't surprising, since the U.S. stock market was the big winner of the twentieth century. Its weighting increased to 47% of the world's total and, in general, it performed more favorably than the rest of the world's markets. This occurred for a number of reasons, but chief among them were larger investments in physical and human capital, greater technological advancement and greater productivity growth. With its huge investment demand and technological superiority, the U.S. investment industry was a worldwide leader.
Other countries have lesser-known histories. For example, it took the United Kingdom much longer to recover from the world wars. Its diminished role after the collapse of the British Empire and the complicated bureaucracies of the colonial system slowed the United Kingdom's growth immeasurably. According to the authors, problems with defense spending, labor, productivity and investment plagued the British economy and markets until the mid-1970s.
Read more here at Investopedia.com.