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Compendium of Recent “Long Run” Research

Posted in Big Ideas

The following list links to summaries of recent (since 2010) investment research using long data samples. These summaries may be helpful in developing strategic allocations and tactical wariness for long-horizon investments.

Another long run source is the annual update of the work summarized in Triumph of the Optimists (Chapter-by-Chapter Review).

Some general cautions regarding such studies are:

  • Reconstruction of price series from, for example, old newspapers involves missing data and potentially inconsistent reporting approaches. In other words, quality of old data is suspect.
  • The number of asset class price series available may be small in early parts of sample periods.
  • Some studies may impound survivorship bias via omission of assets that were important in the past but are no longer tracked in source databases.
  • For studies using Shiller data, monthly levels are averages of monthly values, blurring monthly statistics and modestly blurring annual statistics. Results based on end-of-month values may differ.
  • Reported returns are gross, not net. Accounting for costs of maintaining a tracking fund for a portfolio/index of commodities would reduce returns. Also:
    • Studies involving shorting (such as factor premium analyses) typically do not address the cost/feasibility of shorting.
    • Costs of maintaining tracking funds may vary by asset class, by country and over time, confounding comparisons. For example, commodity futures indexes generally assume monthly rolling of many contract series.
    • Investment capacities of some assets may be especially limited early in sample periods.
    • Tax consequences of trading vary considerably across countries and over time.
  • Historical timeliness of data collection/processing for periodic trading (for example, for portfolio rebalancing) may be especially problematic in early parts of sample periods.
  • Economies and markets change over time, making it difficult to assess the relative importance of older versus newer data.
  • Distant past availability of retrospectively constructed indexes may have altered contemporaneous market behaviors (induced market adaptations).
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