- Hardcover: 320 pages
- Publisher: Princeton University Press (January 1, 2002)
- Language: English
- ISBN-10: 0691091943
- ISBN-13: 978-0691091945
- Product Dimensions: 9 x 1.2 x 11 inches
- Shipping Weight: 3.8 pounds (View shipping rates and policies)
- Average Customer Review: 17 customer reviews
- Amazon Best Sellers Rank: #387,762 in Books (See Top 100 in Books)
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Triumph of the Optimists: 101 Years of Global Investment Returns
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"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 ofCapital 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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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.
Long bonds returned more than short bonds, but with a lot more risk. High grade corporate bonds returned more on average, but again, with some severe downdrafts.
Purchasing power parity seems to work for currencies in the long run. (Note: estimates of forward interest rates work in the short run, but they are noisy.)
International diversification may give risk reduction. During times of global stress, such as wartime, it may not diversify much. Global markets are more correlated now than before, reducing diversification benefits.
Small caps may or may not outperform large caps on average.
Value tends to beat growth over the long run.
Higher dividends tend to beat lower dividends.
Forward-looking equity risk premia are lower than most estimates stemming from historical results. (Note: I agree, and the low returns of the 2000s so far in the US are a partial demonstration of that. My estimates are a little lower, even...)
Stocks will beat bonds over the long run, but in the short run, having some bonds makes sense.
Returns in the latter part of the 20th century were artificially high.
The statistical chapters on the 16 developed markets are amazing, but now almost seven years dated. Still, you can glean a lot from them.
This is an expensive book, and one that may not be for everyone. A cheaper book that covers many of the same issues is Stocks for the Long Run, by Jeremy Siegel. Now going into its fourth edition (I have a signed first edition), it covers many of the same issues, but with more of a US-centric approach, and going back another 100 years (with spotty data).
As I like to say, stocks do well, absent war on your home soil, out-of-control socialism, and severe recession/depression. These books will help you stay in the market even when times are hard. After all, who can tell when the market will turn up? Or down?
First, although much is made of the quality of the data much of the data is from other authors and sources and is used blindly. In other words much of what the authors have done is collation.
Second, there are several countries that ostensibly did better than the U.S and Britain during the twentieth century but little is said about this fact and indeed the authors spend some pages justifying the emphasis on the U.S. and Great Britain during the twentieth century. But the reasons they give are hollow. There may have been justification but greater depth was in order.
Third, although there is a great deal of information in the book several graphs are presented in a confusing manner i.e. the same color line is used for several curves on the same graph making interpretation almost impossible.
Fourth, reading the book is in many places a lot like taking the SAT or GRE graph interpretation section. There is much here but it would have been much more impressive if the authors had drawn some deeper conclusions than was the case. Probably many will attempt to justify this deficiency by stating that the purpose of the book was the assembly of the data in one place and that others will use the data for developing profound interpretations and conclusions. But I don't believe that will happen: the authors understand that the main users of the book will be institutional and personal investors. That is sad for there is much to be interpreted here in a deep and satisfying manner.
Fifth, the authors clearly suscribe to the idea that the data in this book will help readers determine the most likely future returns of the stock markets. But I suspect strongly that William Bernstein is correct and that past returns are best at determining future risks of investing and rather less usefull for determining future returns. The case the authors make for using the data for determining future results is laughable: in essence everybody else does it. The hypothesis may be true but that is hardly a case for it.
Sixth, it would have been fascinating for the authors to have analysed how open some of these societies were during various periods in the twentieth century and related that to investment performance.
Those that believe a CD or soft copy would have been better because of the more detailed access to the data have missed the point entirely.
In the final analysis there is enough data here to keep political economists, sophisticated investors, and many others occupied for many years-if nothing else they can attempt to fill in some of the gaping holes. For instance, many in the U.S. believe that our inflation numbers for several years now are "cooked" to some extent. Certainly this is true for some other countries as well. Yet every bit of the inflation data is presented as the gospel with no challenge or analysis. If the authors did do some analysis here (or even if the primary sources did) and found the "cooking" insignificant or significant then it seems they should have presented their findings in a more complete fashion. Is the data reliable or not? That is the question. This is just one example out of the entire book. Hardly a page goes by without similar questions arising. Too bad the authors could not be bothered to answer any of them
Finally, it is particulary fun to read Triumph of the Optimists in conjunction with Adventure Capitalist.
Most recent customer reviews
This book was lacking in several respects: