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Triumph of the Optimists: 101 Years of Global Investment Returns

3.9 out of 5 stars 17 customer reviews
ISBN-13: 978-0691091945
ISBN-10: 0691091943
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Editorial Reviews

Review

"At the very least, this [book] suggests that the recent blind adherence to the cult of the equity needs to be questioned and that the strategic weighting of bonds in institutional portfolios should be increased."--Philip Coggan, Financial Times

"A model of how investor research should be carried out. . . . Like most great books, Triumph of the Optimists has us saying 'Wow!' and 'Unbelievable!' with startling regularity. . . . This is a book that belongs on every investor's bookshelf."--Victor Niederhoffer and Laurel Kenner, "Money" columnists, msn.com

"Connoisseurs of financial history will find plenty to enjoy in Triumph of the Optimists. . . . The evidence produced by Mr. Dimson and his colleagues is striking, [and]. . . these issues are more than just academic. . . . A provocative lesson."--Matthew Lynn, Financial Times

"By far the most important investment book in years. . . .It is the best and most complete source of data yet available. . . . If you spend an hour with it and don't learn anything worth the price then you're truly lousy at learning about markets. . . Right now, buying this book makes more sense than buying stocks."--Ken Fisher, Bloomberg Money

"A brilliant new book."--Jason Zweig, Time

"Our favorite book on global stock market performance. . . . [It] epitomizes outstanding investment research. . . . Unless intelligent life is discovered on another planet and a stock market is found to have been operating there for some centuries, it is unlikely that much new data can be brought to bear on the issue of long-run stock returns. Triumph of the Optimists may well be the last word on the subject for some time to come."--Active Trader magazine

From the Inside Flap

"This will become the definitive empirical basis for analysis of the world's capital markets over the twentieth century. It is an important work of scholarship; no one else has calculated the equity premium of a large number of countries over the long term. In doing so, the book contributes to the very lively debate on the magnitude of the equity premium and will make a splash."--William Goetzmann, Yale University

"Recent years have seen unprecedented public interest in the stock market, but there is a tendency for investors to concentrate on recent U.S. stock market performance. Progress in understanding financial markets requires a much longer timeframe and a global perspective. This book presents and analyzes data from many countries in a simple, standardized way that makes comparisons easy. It makes a number of extremely important points and goes well beyond simple summaries of average returns and historical volatilities to look at such issues as seasonality and industrial structure."--John Campbell, Harvard University

"No investor can afford to risk a penny in the markets without studying this book and absorbing its fascinating lessons. That advice applies whether you are professional or amateur, a youngster or hardened from experience, bold or conservative. This book is history at its most challenging and illuminating. The facts are astonishing, the presentation dazzling, the analysis brilliant, and the lessons profound."--Peter L. Bernstein, author of Capital Ideas and Against the Gods

"This is an important addition to the investment literature and will be widely used by both the academic and business community. To have the scope of data and analysis contained in this book available in one place represents a major contribution and improvement over what is now available."--Martin J. Gruber, New York University

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Product Details

  • Hardcover: 320 pages
  • Publisher: Princeton University Press (January 1, 2002)
  • Language: English
  • ISBN-10: 0691091943
  • ISBN-13: 978-0691091945
  • Product Dimensions: 8.6 x 1.3 x 11.3 inches
  • Shipping Weight: 3.8 pounds (View shipping rates and policies)
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (17 customer reviews)
  • Amazon Best Sellers Rank: #435,750 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Tim Josling on July 14, 2003
Format: Hardcover Verified Purchase
This is a very handsome book with lovely graphs etc. However I was after a useful summary of historical market performance.
This book was lacking in several respects:
1. The numbers behind the graphs are not provided and are not available so you cannot do any further analysis yourself. The graphs themselves are also drawn in such a way that it is hard to extract the numbers using a ruler.
2. The problem of survivorship bias. They claim that while the 16 countries analysed are an incomplete list (only 70% of world GDP in 1900), this is not a big problem, they feel. Their message that stocks do well in the long run supposedly remains intact, however they do not provide any solid evidence of this. The countries left out of course suffered terrible performance, with total confiscation of assets in most cases and major losses in others.
The countries left out include: Russia, China, Eastern Europe, Latin America. As an example, Argentina was the wealthiest country 100 years ago but was left out. They claim that their criterion for inclusion was the availability of data, but Switzerland was included even though the data is incomplete.
In my opinion, some attempt should have been made to adjust for this problem.
3. No assessment is made of the issue of capital controls etc as an impedement to implementing the world indexing strategy. It is simply assumed that equal dollar indexing could be implemented without any costs, and with no taxes.
All in all, this book fails to provide a realistic and convincing assessment of global investment returns in the real world.
Victor Niederhoffer uses this book to justify his bullishness on stocks, Sorry Vic, no cigar.
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Format: Hardcover
"In writing this book," authors Dimson, Marsh, and Staunton conclude, "we set out to answer four big questions: How have stock markets performed over the twentieth century, domestically and internationally? How has this compared with bonds and bills? What has been the impact of foreign exchange fluctuations? And what toll has inflation taken?"
In answering these questions, the authors have achieved perhaps the greatest triumph: assembling a 101 year database from 16 countries that is free from the "easy data" biases that result from utilizing readily available--but skewed--financial information.
In the spirit of their title, the authors find that stocks worldwide provide real risk-adjusted returns above and beyond bills and bonds. Interestingly, their estimates of risk premia are more modest than those offered by traditional sources. They also provide intriguing support for seasonality effects and the favorable returns associated with high dividend yields, value investing, and worldwide diversification.
Quite simply, I know of no other source of information on the "big picture" of investing that is as thorough or as lucidly outlined. This is a rare work of theoretical *and* practical significance.
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Format: Hardcover
Triumph of the Optimists: 101 Years of Global Investment Returns is a remarkable and important book. Churchill's maxim that "The further backward you can look, the farther forward you are likely to see" is useful in approaching this book. The authors have painstakingly created data series back to 1900 for 16 countries and come to brilliant conclusions about what the future holds for investors. From the past the future flows, and as long as human beings price securities it is likely that we will continue to make erroneous predictions based upon our most recent experience.
Triumph of the Optimists shows readers what the most likely returns will be for world investors and offers vital data for investors planning for the future. This is a "must have" book for both professional and amateur investors.
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Format: Hardcover
Good investors are typically skeptical. They don't buy every idea that comes their way, but they test and probe to find ideas with compelling value that are misunderstood by others. That said, the best investors are prudent risk-takers. They continue to search for good investments even in environments that seem to have a negative investing climate.

Skepticism can degenerate to permanent pessimism, particularly because most news coverage tends toward the negative. How does an investor remain bullish in the face of news flow that is predominantly negative? By looking at the broader tendencies of equity markets to flourish in the face of troubles over the long run. One good book for that is Triumph of the Optimists. [TOTO]
TOTO points out a number of things that should bias investors toward risk-bearing in the equity markets:

Over the period 1900-2000, equities beat bonds, which beat cash in returns. (Note: time weighted returns. If the study had been done with dollar-weighted returns, the order would be the same, but the differences would not be so big.)
This was true regardless of what presently developed nation you looked at. (Note: survivor bias... what of all the developing markets that looked bigger in 1900, like Russia and India, that amounted to little?)
Relative importance of industries shifts, but the aggregate market tended to do well regardless. (Note: some industries are manias when they are new)
Returns were higher globally in the last quarter of the 20th century.
Downdrafts can be severe. Consider the US 1939-1932, UK 1973-74, Germany 1945-48, or Japan 1944-47. Amazing what losing a war on your home soil can do, or, even a severe recession.
Real cash returns tend to be positive but small.
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