Wednesday, February 28, 2018

The Rate of Return on Everything

Jorda, Knoll, Kuvshinov, Schularick and Taylor deliver more than just a memorable title, "The Rate of Return on Everything, 1870-2015". (Dec 2017 NBER version here; earlier ungated June 2017 version here.) Their paper is a fascinating exercise in data construction and analysis. It goes well beyond, say, the earlier and also-fascinating Dimson et al. (2002) book, by including housing, among other things.

Caveat emptor: In this case two words suffice -- survivorship bias. Jorda et al. are well aware of it, and they work hard to assess and address it. But still.