Question 12.4: Calculating the Geometric Average Return Calculate the geome...
Calculating the Geometric Average Return
Calculate the geometric average return for S&P 500 large-cap stocks for the first five years in Table 12.1, 1926–1930.
First, convert percentages to decimal returns, add 1, and then calculate their product:
Table 12.1, Year-to-Year Total Returns: 1926–2010.
Consumer Price Index |
.U.S Treasury Bills |
Long-Term | -Large Company Stocks |
Year | Consumer Price Index |
.U.S Treasury Bills |
Long-Term Government Bonds |
Large Company- Stocks |
Year |
6.2 | 6.9 | 5.63- | 8.43- | 1969 | 1.12%- | 3.30% | 5.69% | 13.75% | 1926 |
5.57 | 6.5 | 18.92 | 3.94 | 1970 | 2.26- | 3.15 | 6.58 | 35.7 | 1927 |
3.27 | 4.36 | 11.24 | 14.3 | 1971 | 1.16- | 4.05 | 1.15 | 45.08 | 1928 |
3.41 | 4.23 | 2.39 | 18.99 | 1972 | 58. | 4.47 | 4.39 | 8.8- | 1929 |
8.71 | 7.29 | 3.3 | 14.69- | 1973 | 6.40- | 2.27 | 4.47 | 25.13- | 1930 |
12.34 | 7.99 | 4 | 26.47- | 1974 | 9.32- | 1.15 | 2.15- | 43.6- | 1931 |
6.94 | 5.87 | 5.52 | 37.23 | 1975 | 10.27- | 88. | 8.51 | 8.75- | 1932 |
4.86 | 5.07 | 15.56 | 23.93 | 1976 | 76. | 52. | 1.92 | 52.95 | 1933 |
6.7 | 5.45 | 0.38 | 7.16- | 1977 | 1.52 | 27. | 7.59 | 2.31- | 1934 |
9.02 | 7.64 | 1.26- | 6.57 | 1978 | 2.99 | 17. | 4.2 | 46.79 | 1935 |
13.29 | 10.56 | 1.26 | 18.61 | 1979 | 1.45 | 17. | 5.13 | 32.49 | 1936 |
12.52 | 12.1 | 2.48- | 32.5 | 1980 | 2.86 | 27. | 1.44 | -35.45 | 1937 |
8.92 | 14.6 | 4.04 | 4.92- | 1981 | 2.78- | 06. | 4.21 | 31.63 | 1938 |
3.83 | 10.94 | 44.28 | 21.55 | 1982 | 0.0 | 04. | 3.84 | 1.43- | 1939 |
3.79 | 8.99 | 1.29 | 22.56 | 1983 | 71. | 04. | 5.7 | 10.36- | 1940 |
3.95 | 9.9 | 15.29 | 6.27 | 1984 | 9.93 | 14. | 47. | 12.02- | 1941 |
3.8 | 7.71 | 32.27 | 31.73 | 1985 | 9.03 | 34. | 1.8 | 20.75 | 1942 |
1.1 | 6.09 | 22.39 | 18.67 | 1986 | 2.96 | 38. | 2.01 | 25.38 | 1943 |
4.43 | 5.88 | 3.03- | 5.25 | 1987 | 2.3 | 38. | 2.27 | 19.49 | 1944 |
4.42 | 6.94 | 6.84 | 16.61 | 1988 | 2.25 | 38. | 5.29 | 36.21 | 1945 |
4.65 | 8.44 | 18.54 | 31.69 | 1989 | 18.13 | 38. | 54. | 8.42- | 1946 |
6.11 | 7.69 | 7.74 | 3.1- | 1990 | 8.84 | 62. | 1.02- | 5.05 | 1947 |
3.06 | 5.43 | 19.36 | 30.46 | 1991 | 2.99 | 1.06 | 2.66 | 4.99 | 1948 |
2.9 | 3.48 | 7.34 | 7.62 | 1992 | 2.07- | 1.12 | 4.58 | 17.81 | 1949 |
2.75 | 3.03 | 13.06 | 10.08 | 1993 | 5.93 | 1.22 | 98.- | 30.05 | 1950 |
2.67 | 4.39 | 7.32- | 1.32 | 1994 | 6 | 1.56 | 20.- | 23.79 | 1951 |
2.54 | 5.61 | 25.94 | 37.58 | 1995 | 75. | 1.75 | 2.43 | 18.39 | 1952 |
3.32 | 5.14 | 0.13 | 22.96 | 1996 | 75. | 1.87 | 2.28 | 1.07- | 1953 |
1.7 | 5.19 | 12.02 | 33.36 | 1997 | 74.- | 93. | 3.08 | 52.23 | 1954 |
1.61 | 4.86 | 14.45 | 28.58 | 1998 | 37. | 1.80 | 73.- | 31.62 | 1955 |
2.68 | 4.8 | 7.51- | 21.04 | 1999 | 2.99 | 2.66 | 1.72- | 6.91 | 1956 |
3.39 | 5.98 | 17.22 | 9.1- | 2000 | 2.9 | 3.28 | 6.82 | 10.5- | 1957 |
1.55 | 3.33 | 5.51 | 11.89- | 2001 | 1.76 | 1.71 | 1.72- | 43.57 | 1958 |
2.38 | 1.61 | 15.15 | 22.1- | 2002 | 1.73 | 3.48 | 2.02- | 12.01 | 1959 |
1.88 | 94. | 2.01 | 28.89 | 2003 | 1.36 | 2.81 | 11.21 | 47. | 1960 |
3.26 | 1.14 | 8.12 | 10.88 | 2004 | 67. | 2.40 | 2.20 | 26.84 | 1961 |
3.42 | 2.79 | 6.89 | 4.91 | 2005 | 1.33 | 2.82 | 5.72 | -8.75 | 1962 |
2.54 | 4.97 | 28. | 15.79 | 2006 | 1.64 | 3.23 | 1.79 | 22.7 | 1963 |
4.08 | 4.52 | 10.85 | 5.49 | 2007 | 97. | 3.62 | 3.71 | 16.43 | 1964 |
09. | 1.24 | 41.78 | 37- | 2008 | 1.92 | 4.06 | 93. | 12.38 | 1965 |
2.72 | 15. | 25.61- | 26.46 | 2009 | 3.46 | 4.94 | 5.12 | 10.06- | 1966 |
1.5 | 14. | 7.73 | 15.06 | 2010 | 3.04 | 4.39 | 2.86- | 23.98 | 1967 |
4.72 | 5.49 | 2.25 | 11.03 | 1968 |
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