Stocks for the Long Run

Siegel assembled a two-century series of US asset returns and used it to make an empirical argument: equities have beaten bonds and bills over essentially every long holding period, the real return on stocks has been remarkably stable at roughly 6.5–7% a year across wildly different monetary regimes, and the risk of stocks therefore falls relative to bonds as the holding period lengthens. Whatever one thinks of the inference, the data set is the point — it is the foundation under a great deal of subsequent buy-and-hold and index investing, and the thing later critics have had to argue with.

Why it’s on the list: Li Lu’s Value Investing, Finance, and Capitalism section is built for a long-horizon investor, and this is the entry that supplies the historical base rate that a long horizon is reasoning against. It sits oddly next to the stock-picking literature around it, which is probably the reason to read both.

Where I saw it: On Li Lu’s Recommended Book List, entry 42 in the value-investing section, cited as McGraw-Hill 2002. Kyle saved the list as two X posts that between them photographed only this section; the full list was recovered from the source PDF.

Connections

• Li Lu’s Recommended Book List — the bibliography this came from.
• Investing · Index Funds — the case this book underwrites.
• Economic History — where the two-century return series comes from.