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Imagination is a poor substitute for experience


Havelock Ellis

A finite world can support only a finite population;


therefore, population growth must eventually equal zero
Garrett Hardin

Macroeconomic policy can never be devoid of politics:


it involves fundamental trade-offs and affects different
groups differently
Joseph Stiglitz

Life is the art of drawing without an eraser


John W. Gardner

Ageings alright, better than the alternative, which is not


being here
George H. W. Bush

Nobody goes there anymore. It's too crowded


Yogi Berra

Published by Barclays
13 February 2014
ISBN 978-0-9570088-2-3
100

Barclays | Equity Gilt Study

EQUITY GILT STUDY 2014

59th Edition
The Equity Gilt Study has been published continuously since 1956, providing data, analysis
and commentary on long-term asset returns in the UK and US. This publication contains a
uniquely long and consistent database: the UK data go back to 1899, while the US data
provided by the Centre for Research in Security Prices at the University of Chicago begin
in 1925. We also use the Equity Gilt Study as an opportunity to analyze medium- to longterm market trends.
Chapter 1 considers whether the eurozone is moving toward Japan-style deflation. Our
assessment is that the verdict is still out, but the risks are higher than market pricing or
policymakers suggest. ECB policy is starting to look too tight and bank lending has yet to
improve. True, the asset price shock, demographic dynamics and exchange-rate trend are
less acute than they were in Japan, but tight fiscal policy, ongoing internal devaluations and
global disinflationary pressures are adding to the eurozones deflation risks.
Chapter 2 introduces a new valuation metric for stock indices that accounts for
differences in sectoral composition across countries. A country whose equity market
contains a high proportion of companies in sectors that attract low multiples may
appear more inexpensive than it would be if it were analyzed on a sector-by-sector
basis. Applying the sector- and cyclically-adjusted PE ratio (SCAPE) renders US equity
valuations more attractive relative to other countries, which tend to have a larger share of
companies in the financial sector and a smaller share of technology firms.
Chapter 3 looks at the economic implications of demographic change. In China and much
of the economically advanced world, population growth is decelerating and dependency
ratios are rising. These dynamics are set to stress fiscal sustainability in advanced and
emerging markets and could complicate the debt dynamics of southern Europe and
rebalancing in China. They could also tilt the terms of trade in favour of labour income
relative to profits in the US. But we do not expect these dynamics to create strong
deflationary tendencies.
Chapter 4 considers the cost of evolving bank regulation which has mandated capital
structure changes to boost industry safety. It argues that regulations aimed at shifting
the balance between sources of wholesale funding should not increase the average cost
of funding for banks. However, reforms that raise capital requirements as a percentage
of the balance sheet could constrain the ability of large banks to interact efficiently with
clients, creating a cost that would be passed on to various stakeholders. We suggest
that these costs be weighed against the safety and soundness benefits.
Chapter 5 focuses on the future of US housing finance, which continues to be explicitly
or implicitly guaranteed by the US government. We estimate that $400-450bn of
private capital will be needed to transfer the credit risk of all government-guaranteed
mortgages to the private sector. Thus, a complete government retreat will need to be
orderly and, in our view, spread over at least 10-15 years.
Chapter 6 examines the investment implications for economies shifting into reflation or
deflation, with an emphasis on Japan and Europe.
We sincerely hope that you find the data and the essays interesting and enlightening, as
well as useful inputs to your investment decisions.

Larry Kantor
Head of Research, Barclays
Website:
E-mail:
13 February 2014

Equity Gilt Study on www.barclays.com


equitygiltstudy@barclays.com
1

Barclays | Equity Gilt Study

CONTENTS
Chapter 1
Japan-style deflation in Europe getting harder to dismiss

Comparing the eurozone with Japan at a similar stage in its deflationary episode
suggests deflation risks in the eurozone are not meaningfully lower. Although not our
central scenario, we think the risks of eurozone deflation are higher than market pricing
or policymaker rhetoric currently imply. The next year or two will be crucial to reaching
a verdict: ECB policy looks increasingly too tight and bank lending has yet to improve,
despite some balance sheet repair. Were deflation to materialize, the asset allocation
implications would be meaningful.

Chapter 2
Introducing the SCAPE:
Why US equities are less expensive than they seem

30

Comparisons of equity-market valuations across countries are complicated by


substantial differences in sectoral composition. We propose an approach to adjust for
the measurement distortion created by these differences, and a valuation metric that
we think better isolates country or regional factors from compositional influences. With
a few exceptions, compositional effects make non-US equity markets appear cheaper
than they would seem after accounting for the effect of sectoral composition. Our
measure of the sector- and cyclically-adjusted PE ratio (SCAPE) suggests that most
non-US markets are still cheaper than the US. But the gap between the US and the rest
of the world is in general meaningfully smaller than the unadjusted CAPE suggests.

Chapter 3
Economic implications of demographic change

38

China and much of the economically advanced world face an important inflection point:
population growth is decelerating and turning negative. Moreover, dependency ratios are
rising, after a long period of stability or decline. We highlight four ways in which this trend
could affect the next decade: 1) complicate the task of fiscal consolidation, mainly
through a rise in age-related public spending; 2) support the process of economic
rebalancing in China while magnifying the challenge of shifting the economy away from
its investment-led development pattern; 3) complicate the debt dynamics of southern
Europe, where population growth is poised to turn negative; and 4) potentially tilt the
terms of trade in favour of labour income relative to profits in the US. However, we do not
think demographics will be the decisive influence on the balance between inflationary and
deflationary forces in the decade to come.

Chapter 4
The cost of evolving bank regulation

51

Since the financial crisis, academics, politicians, and regulators have proposed reforms
aimed at making the banking sector more stable. Often, these rules have sought to
boost industry safety by mandating capital structure changes. Many in the business
world have argued that these reforms are costly. Our analysis suggests that some
reforms are costly. We do not see reforms aimed at shifting the mix between sources of
wholesale funding as costly. However, we believe that raising capital requirements
would constrict the ability of most large banks to interact with clients efficiently,
creating a cost that would be passed on to various stakeholders. Any future rules must
therefore balance these costs against the safety and soundness benefits.

13 February 2014

Barclays | Equity Gilt Study

Chapter 5
The future of US housing finance

70

Even as the US housing market has had a remarkable resurgence in the past few years,
housing finance has not. The extent of government involvement in mortgage lending
poses unacceptable risks to the taxpayer. Among existing legislative proposals, the
Corker-Warner bill looks to be the most promising. It requires the first-loss piece to be
backed by sufficient private capital to deal with stressful scenarios but also provides an
explicit government backstop under extraordinary circumstances. We estimate that
$400-450bn of private capital is needed to absorb the credit risk of all $4-4.5trn in
government-guaranteed GSE mortgages, assuming a 10% first-loss piece. The private
markets cannot raise this amount easily. In our view, a government retreat will need to be
spread over at least 10-15 years, not the five years proposed by Corker-Warner.

Chapter 6
Shifting inflation landscapes: Implications for Japan and Europe

90

We examine the relative impact of reflation and deflation on financial markets, and the
implication for regional asset allocation. We compute the optimal allocations across
different inflation regimes and find that if Japan continues to transition out of deflation,
the impact is relatively clear and equities are likely to outperform fixed income. For
Europe, the story seems more nuanced. Here we find that the investment cycle plays an
important role in determining how to allocate if we slip into deflation.

Chapter 7
UK asset returns since 1899

97

2013 can be described as a year of two halves: pre- and post-tapering fears. Fed
Chairman Ben Bernankes speech on 22 May signalled the inflexion point for UK and US
bond markets. Gilts sold off in synch with US Treasuries. Annual real bond returns of -9.6%
in the UK are the worst since the bond rout of 1994, when gilts sold off 14% in real terms.
Equity markets performed well despite the turbulence introduced by monetary policy
uncertainty. The FTSE All-Share initially sold off 11% in response to tapering fears, before
recovering to end the year up 17% in terms of nominal capital returns.

Chapter 8
US asset returns since 1925

102

Equities were the best-performing assets of 2013, producing a c.29% real total return,
despite a turbulent path as investors digested news of monetary policy normalisation
by the Fed. Returns on Treasuries and TIPS collapsed in 2013, following Fed Chairman
Ben Bernankes speech on 22 May which first mentioned the prospect of tapering asset
purchases. 10-year yields rose from near historical lows of 1.6% to end the year above
3%. Real total returns on Treasuries fell 13% in 2013, compared with a 2% real total
return in 2012.

Chapter 9
Barclays Indices

106

We calculate three indices: changes in the capital value of each asset class; changes to
income from these investments; and a combined measure of the overall return, on the
assumption that all income is reinvested.

Chapter 10
Total investment returns

129

We present a series of tables showing the performance of equity and fixed-interest


investments over any period of years since December 1899.

13 February 2014

Barclays | Equity Gilt Study

CHAPTER 1

Japan-style deflation in Europe getting


harder to dismiss
Jim McCormick

Comparing the eurozone with Japan at a similar stage in its deflationary episode
suggests deflation risks in the eurozone are not meaningfully lower. Although
not our central scenario, we think the risks of eurozone deflation are higher than
market pricing or policymaker rhetoric currently imply.

+44 (0)20 7773 7699


jim.mccormick@barclays.com
Philippe Gudin
+33 1 4458 3264

Although the asset price shock, demographics and exchange-rate trend are less
acute than they were in Japan, tight fiscal policy, ongoing internal devaluations
and global disinflationary pressures all add to the eurozones deflation risks.

philippe.gudin@barclays.com
Marvin Barth
+44 (0)20 3134 3355

The next year or two will be crucial to reaching a verdict: ECB policy looks
increasingly too tight and bank lending has yet to improve, despite some balance
sheet repair.

marvin.barth@barclays.com
Ian Scott

Longer-term inflation expectations in the eurozone are anchored but, similar to


Japan in the mid-1990s, shorter-dated inflation expectations are declining.

+ 44 (0)20 3134 7668


ian.c.scott@barclays.com
Barclays, London
Francois Cabau

At the country level, how and when France and Italy seek to restore
competitiveness will be key to whether region-wide deflation develops.

Were deflation to materialize, the asset allocation implications would be

+44 (0)20 3134 3592

meaningful: the current consensus view that eurozone equities are cheap and
yields too low, would be challenged; further upside potential in bank equities
would be limited; risks to the euro would tilt up; and peripheral debt sustainability,
already tenuous, would be challenged further.

francois.cabau@barclays.com

For many years, Japan's persistent deflation trend was viewed as an anomaly among
major developed economies. Although Japans deflationary period generated volumes
of academic research, such a situation was not viewed as a realistic threat for other
major economies. The 2008 financial crisis changed this perspective. At first, fears
centred on the US, but as the US economy has begun to recover, concerns about US
deflation have ebbed a little. Still, it is notable that after five years of unprecedented
policy easing, policy rates at zero and a significant decline in the rate of unemployment,
the core Personal Consumption Expenditure (PCE) inflation rate is still just above 1%
and has remained well below the Federal Reserves 2% target. In 2011 we looked at
whether the US was at risk of a Japan-style deflation cycle and judged the risks as low 1.
It is still early to argue that the US is out of the woods on the deflation front, but we are
confident that our view is on track.
These days, concerns about a prolonged deflationary episode have shifted to the euro
area. At the end of 2013, core inflation in the eurozone touched a record low of 0.7%,
with several southern euro countries, including Greece, posting outright deflation.
Members of the European Central Bank (ECB) are now taking their turn to defend their
policies and strongly contrast current eurozone conditions with Japans experience of
the past 20 years. In public, at least, the ECB sees little risk of Japanese-style deflation
taking hold in the euro area.
In this chapter, we examine whether Europe is at risk of a Japanese-style deflationary cycle
and explore what such a period might mean for asset allocation in European markets.
First, we review Japans deflationary experience and its likely causes. Second, we compare
the relevant factors of Japans deflation experience with the eurozone today. Third, we
highlight three important factors that make the eurozone different from Japan. Fourth, we
assess the likelihood that eurozone deflationary risks will materialize. Last, we explore the
1

13 February 2014

What's the difference between Japan and the US? 31 August 2011.

Barclays | Equity Gilt Study


potential effects on eurozone asset prices and asset allocation decisions were the
eurozone to experience a prolonged period of sub-par inflation or outright deflation.
Our assessment is that the risks of a region-wide, deflationary period are significant, and
certainly bigger than what is currently priced into financial markets or being publically
acknowledged by eurozone policymakers. In any case, the likelihood of a prolonged period
of falling price levels in at least several eurozone countries looks high.

Understanding Japans deflationary era


Although Japan was in a state of falling prices from the mid-1990s until very recently
(Figure 1), two other points are key to understanding this period: Japan first experienced
falling consumer prices some six years after the bursting of the asset bubble in December
1989. In other words, although the bursting of Japans bubble was almost certainly an
important driver of Japans deflationary cycle (and a key inflexion point), it was not the
only cause and possibly not the main cause. Second, within this deflationary state,
Japans economic performance was not all bad. On some measures, including GDP per
worker, Japans economic performance in the past decade has been impressive2. Now,
after nearly 15 years of uninterrupted price declines, Japan is today enjoying its first
credible period of positive inflation since the late 1980s (without the help of a VAT tax
increase). In other words, Japan may well provide lessons not only on how an economy
can enter and remain in deflation for such a long period, but also on how it may exit
deflation (although it is probably a little early to draw any lessons on exit).

Japan may provide lessons not


only on how an economy can
enter and remain in deflation
for such a long time, but also
on how it may exit deflation

Taken together, these remarks suggest that Japans deflationary era was marked by three
distinct periods. During the first period (1990-2002), Japan faced an almost uninterrupted
series of economic shocks and dislocations. The first, and arguably most severe, of these
was the collapse of the bubble economy of the 1980s, which was compounded by the
almost simultaneous demographic transition from a growing to a shrinking population. By
1996, the labour market seemed to be stabilizing, but the economy was soon undermined
again, this time by the Asian financial crisis. In 1999, the labour market once again
showed signs of steadying, but the economy was then stymied by the collapse of the US
equity bubble. In other words, the 1990s might be viewed as a series of home-grown and
external shocks. Addressed by inadequate but at the time perfectly understandable
policies, these shocks left Japans economy with a huge negative output gap and very low
inflation, which finally gave way to deflation in the late 1990s (Figure 2).

FIGURE 2
Evolution of Japan and eurozone output gaps

FIGURE 1
Evolution of core CPI* in Japan and eurozone
4

4
VAT hike

-2

-1

-4

-2

Japan's bubble
bursts
Asian financial
crisis

US financial
crisis

Nasdaq crash

2011
earthquake

-6
89

91

93

95

97

Japan

99

01

03

05

07

09

11

13

Eurozone: Jul 2007 = start

Source: Barclays Research, Haver Analytics, OECD; * core CPI excludes energy
and fresh food prices (Japans own core measure only excludes fresh food)

13 February 2014

91 93 95 97 99 01 03 05 07 09 11 13 15
Japan

Eurozone: 2007 = crisis start

Source: Barclays Research, Haver Analytics, OECD

Is Deflation a trap? Revisiting the Japanese experience Global Macro Daily, 14 January 2014

Barclays | Equity Gilt Study


The second period, from 2002 until late 2012, was markedly different. This decade
included its share of shocks, including the 2008 US financial crisis and the 2011 Tohoku
earthquake. But in between these shocks, Japan enjoyed a period of sustained economic
and labour market recovery, at least as measured by the unemployment rate. The labourmarket recovery was associated with an easing of deflationary pressures but the
cumulative effects of the 1990s shocks and inadequate policy response meant the
economy was unable to exit deflation in any meaningful way until 2013. This second
period was when deflation expectations became more de-anchored and intermittent
economic recoveries were too shallow to alter the trend.
The third period began in early 2013 with the launch of Abenomics (economic
policies advocated by Prime Minister Shinzo Abe) and what looks to be the emergence
from 15 years of nearly uninterrupted falling prices. Although the focus of this chapter
is on what we can learn from Japans entry into deflation (and the persistence of this
deflation), the success (or failure) of Abenomics will likely provide further lessons for
policymakers and markets in the coming years.

The likely causes of deflation in Japan


There is a great deal of literature on the causes of Japans deflation, much of which we will
draw upon here (see bibliography at the end of this chapter). We divide the likely causes into
five groups: 1) a series of (mainly) financial shocks beginning with the bursting of the 1980s
bubble; 2) negative demographics; 3) policy responses; 4) the de-anchoring of inflation
expectations; and 5) disinflationary pressures from China and other Asian economies.
Series of shocks. The bursting of the 1980s bubble was followed by the Asian financial
crisis, the US equity bubble, the Lehman Brothers collapse, and the Tohoku earthquake
in 2011. During that period, Japanese equities fell by nearly 80% and today remain
nearly 60% below their 1989 peak. Meanwhile, land prices are still 60% below their
1991 peak. In terms of the economic impact of these shocks, a look at Japans output
gap over time is instructive. Each shock was followed by a shallow recovery, but
subsequent shocks consistently left the economy more prone to deflation (Figure 2).
Although the exchange rate is only loosely linked to the financial collapse, for the
purposes of comparing the eurozone with Japan, it is also worth noting that the real
effective yen exchange rate rose 65% between early 1990 (just after the financial
collapse) and mid-1995 (just as Japan was starting to flirt with deflation).
Demographics. At about the same time that Japans asset price bubble was bursting,
Japans demographic picture took a turn for the worse. From its peak in 1995, Japans
working age population (WAP) has fallen by nearly 10%, or about 0.5% per year. There
has been plenty of debate on how big a role this demographic drag has played in Japans
deflationary trends suffice to say that a decline in the working age population as big as
FIGURE 4
Japanese working age population and core CPI

FIGURE 3
Japanese asset prices from relevant peaks
1.0

6
5

0.8

4
3

0.6

2
1

0.4

0
-1

0.2
1987

1992

1997

Equity prices
Source: Barclays Research, Haver Analytics

13 February 2014

2002

2007

2012

Land prices: mid 1991 = peak

-2
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Japan CPI ex food&energy, % y/y
Japan labor force, % 8q/8q
Source: Haver Analytics, Barclays Research

Barclays | Equity Gilt Study


the one experienced in Japan will almost certainly have had some impact on Japans
inflation trends (Figure 4). An anomaly of Japans labour market is a wage structure that
tends to peak in the 50-59 age bracket, before falling markedly (Figure 5). Alongside the
magnitude of the demographic shock, this would suggest that the effect of demographics
has been unusually large in Japan a theme we will explore below.
Inadequate policy response. Criticisms of Japanese policymakers response to the
deflationary period are neither new, nor especially controversial these days. However, it
should be noted that Japans deflation experience occurred when there was no modern
precedent and that any policy made then had to balance lingering concerns about Japans
late-1980s asset price bubble. As such, our ex-post analysis of Japans policy response is not
meant to be a criticism of those choices, especially given the ex-ante situation Japanese
policymakers were facing. History may be harsher on eurozone (and US) policymakers if
similar policy mistakes are made given that Japan does now provide a clear antecedent.
Japans monetary policy was
persistently too tight for
underlying economic
conditions from mid-1998 until
just recently

The main literature on Japans deflationary era focuses on two policy mistakes. The
first was that monetary policy was left too tight relative to underlying economic
conditions. Figure 6 looks at the evolution of a simple Taylor rule for Bank of Japan (BoJ)
policy since 1989. The first cut in the BoJs call rate happened in the middle of 1991 or
18 months after the top of the equity bubble (the TOPIX had fallen 30% by then). From
there, rates were cut aggressively, although it was 1999 before rates were officially cut
to zero. The BoJ did eventually launch QE in March 2001, though the actual balance
sheet expansion was both slower and more modest than the balance sheet expansions
by major central banks after the collapse of Lehman Brothers (this has clearly changed
with the launch of Abenomics). Overall, the Taylor rule analysis suggests Japans
monetary policy was persistently too tight for underlying economic conditions from the
middle of 1998 until just recently. Ironically, Japanese monetary policy today appears
slightly too loose as the unemployment rate has fallen and inflation has risen markedly
over the past year though it is likely to remain that way for some time as the Abe
government and Bank of Japan attempt to pull Japan out of long-term deflation.
Academic literature has also argued that Japanese policymakers were slow in cleaning up
the significant losses in Japans banking system caused by the collapse in asset prices. To
start, banks did not disclose any non-performing loan (NPL) ratios before 1993 and
started to disclose the ratio on a consistent basis only in 1998. Over the course of the
crisis, non-performing loans at Japanese banks reached a peak of 9% (Figure 7). But it
was only in the autumn of 2002 some five years after deflation began that Heizo
Takenaka was appointed head of the Financial Services Agency and put a significant
emphasis on recapitalization. From that point, non-performing loans in Japans banking
system fell markedly and have in recent years returned to pre-crisis levels. One important

FIGURE 5
Per capita manufacturing wages in 2006: Japans
unique structure

FIGURE 6
Taylor rule for Japan monetary policy stance

-29=100

10

180
170
160

150
140
130
120

110
100
-29
Germany
Sweden

30-39

40-49
Age
Italy
Japan

50-59

60Finland

Source: Japan Ministry of Health, Labour and Welfare, Barclays Research

13 February 2014

-5
89

91

93

95 97 99
Taylor rule

01

03 05
Call

07

09 11
BoJ rate

13

Source: BoJ, IMF, Barclays Research

Barclays | Equity Gilt Study


consideration, however, is that even with Japanese banks returning to better health in
recent years, loan growth has been very weak and the proportion of loans to government
bond holdings has remained far below pre-crisis levels. (On the latter, large accumulation
of government bonds on bank balance sheets at the expense of making loans is a natural
reaction in a deflationary environment a trend that Abenomics would like to curb).
Eventual de-anchoring of inflation expectations. There is no easy way to measure
inflation expectations in Japan dating back to the start of the deflationary period. Inflation
breakeven data and price expectations from the household survey began only in the early
2000s. That said, research by the Bank of Japan 3, has used the evolution of consensus
expectations to highlight the shift in inflation expectations that occurred in the late 1990s
(see chart on page 12 of the BoJ paper). Originally, the drop in inflation was expected to be
temporary: in 1996, consensus forecasts for year-ahead Japanese inflation began to fall,
but forecasts for 6-10 years out were broadly unchanged (in the range of 1-2%). By 1998,
1-year-ahead forecasts for inflation had fallen below zero, but it was not until 2003 that
zero inflation was expected on a longer-run horizon some five years after Japan entered
deflation. A key lesson for the ECB from the Japan experience is that focusing on longterm inflation expectations measures (the ECB often cites 5y5y breakevens as its preferred
benchmark) is reasonable, but short-dated inflation expectations dynamics can provide
important information on how long-term expectations are evolving.

Short-dated inflation
expectations dynamics can
provide key information on
how long-term expectations
are evolving

Surge in Chinese exports. Academics are divided on the impact of Chinas export surge on
global inflation trends. We will simply say that it is hard to imagine that Chinas export surge
did not have direct or indirect effects on Japanese price levels. The strong entrance of
Chinese exporters to the global trade market placed a significant downward pressure on
tradable goods prices, and intensified competition worldwide. One possible illustration of
this is the relative performance of export market shares in China and Japan in the past
decade (Figure 8); China gained a significant market share, while Japan, despite adjusting
export prices considerably, has continuously lost global export share (Figure 8).

Comparing the eurozone with Japan


We now make direct comparisons, where relevant, with current conditions in the eurozone.
There is no consensus on what start date to use in a comparison of Japan and the eurozone.
For simplicity, we have chosen December 1989 in Japan and July 2007 in the eurozone
points where asset prices peaked and significant subsequent declines in these prices led
directly or indirectly to negative shocks for the macro economy and bank balance sheets.
The following is a summary of how these variables compare.
FIGURE 7
The evolution of Japanese banks NPL ratio

FIGURE 8
Japan has faced strong competition from Chinese exports

JPY trn
18

16
14
12
10
8
6
4
2

Japan banks' losses on NPL disposal


Source: Haver Analytics, Barclays Research

2012

2011

2010

NPL ratio (RHS)

Japan export market share, LHS


Japan export prices, RHS

115

600

China export market share, RHS


105

500

95

400

85

300

75

200

65

100

55

0
95

97

99

01

03

05

07

09

11

13

Note: Export market shares are measured by export volume relative to total
foreign demand for the countrys exports, ie its export market. Source: Haver
Analytics, Barclays Research
3

13 February 2014

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

10
9
8
7
6
5
4
3
2
1
0

Chronic Deflation in Japan, Kenji Nishizaki, Toshitaka Sekine, Yoichi Ueno, Bank of Japan Working Paper Series

Barclays | Equity Gilt Study

The size of the financial shocks


Eurozone asset price declines
are more modest, but probably
closer to Japans experience
than many believe

It is often assumed that Japans asset price declines were far larger than those
experienced in the eurozone. Although this is true over the full course of Japans
deflation experience, asset price declines in the eurozone today do not differ drastically
from those in Japan at a similar stage of the crisis. Figures 9 and 10 show the size of the
asset price declines in Japan since 1989 and in the eurozone (aggregate and periphery)
since 2007. A few points are clear. First, in the initial stage of the crisis, the decline in
eurozone equities was actually bigger than in Japan aggregate eurozone and
peripheral equities fell by more than 60% from the 2007 peak in the first 18 months.
Since then, aggregate eurozone equities have recovered though the aggregate drop
(30%) is not much smaller than Japans (39%). Indeed, peripheral equities are still
below Japanese equity levels six years into the crisis.
It is much harder to compare the effects of land/housing declines, but it is probably fair
to say that the overall impact on housing price declines in the eurozone has been far
smaller than Japans experience. Indeed, for the eurozone as a whole, residential
property prices are largely where they were in 2007 thanks in part to a mini-boom in
German house prices. Still, for this analysis, it is also worth highlighting that those
eurozone countries that experienced housing bubbles and busts, such as Spain and
Ireland, have seen price declines much larger than those experienced in Japan at a
similar point in the cycle (Japans land prices did eventually far surpass the current
experience in Spain and Ireland).

The Japanese experience


warns that European asset
markets could get much
cheaper if the eurozone slips
into deflation

We draw three lessons from the asset boom/bust comparisons. First, if asset price
deflation was truly a driver of broader Japanese deflation, we should probably view the
experience in the eurozone as only slightly less worrying than Japans experience. This is
especially true if, as we will explore, the question of eurozone deflation risks becomes
more region-specific: for example, deflation in Spain under this framework is cause for
concern. Second, one important difference that may argue that eurozone asset price
deflation is a smaller risk is the absence of equity cross-share holdings in European
banks. Indeed, Japans financial institutions held around 40% of the equity market when
the bubble burst, which exacerbated the hit to bank balance sheets. This is not an issue
for eurozone banks today. Third, although the interaction between economy-wide and
asset-price deflation is complex, we should remember that a major leg of Japans asset
price deflation happened once economy-wide deflation had become entrenched.
Indeed, if we were to extend Figures 9 and 10 into Japans actual deflationary period,
Japanese equities bottomed only in 2003, at barely 20% of December 1989 levels
(which means they fell another 50% from what had already been considered cheap
levels in the mid-1990s). Meanwhile, Japanese land prices remain some 65% below

FIGURE 9
Equity market performance from peak of market

FIGURE 10
Land/house price performance from peak of market

MSCI equity indices

Japan: 12/1989=100
Eurozone: 07/2007=100

Japan
Eurozone
Euro periphery (PPP weighted)

100

Japan: Q4/1991=100
Eurozone: Q2/2007=100
110

Japan urban land price


EZ residential property price
SP-IR residential property price

100

80

90
60

80

40

70
Years from base

20
0

Source: Bloomberg, Barclays Research

13 February 2014

Years from base

60
0

Source: Bloomberg, Haver, Barclays Research

Barclays | Equity Gilt Study


their 1991 peaks. In other words, while the common view is that European asset
markets are cheap at current levels, the Japanese experience warns that they could get
much cheaper if the eurozone slips into deflation.

Negative demographics
Eurozone demography is
turning negative, but the trend
will be shallower than Japans

Eurozone demography is turning negative, but the trend will be shallower than Japans4.
The working age population in the euro area reached its peak in 2011, closely tracking the
peak of the credit crunch, similar to how things played out in Japan. However, despite
these similarities, the demographics of the euro area are different from Japans in several
ways. First, although Japan experienced a freefall in the working age population, the postpeak downturn in all the major euro area countries except for Germany is projected to be
considerably more muted (Figure 11). In fact, the stark difference between the fast
deterioration of Japans WAP and the more moderate one in the euro area countries will
only increase over time (Figure 12), according to UN projections.
Within the euro area, demographic trends vary greatly in size, speed, phase of transition
and overall severity. Figure 13 provides a coherent framework using WAP and
dependence ratios to assess the demographic risk of each of the nine most populated
euro area countries relative to Japan. The last column ranks each of the EA-9, using
Japans metrics as benchmark. As the table shows, Portugal is in the best demographic
position, thanks to a very slow expected rise in its dependence ratio in the coming decade
and a slower decline in its WAP. French demographics are also relatively positive because
of an odd mix of better WAP dynamics offset by a significant rise in the dependence ratio.
Perhaps surprisingly, Italys demographics are in the middle of the pack its WAP fall is
expected to be nearly as negative as it was in Japan, but the dependency ratio rise will
likely be more muted. Germany has had the weakest demographics in the eurozone in
recent years and will continue to face the biggest challenges for some time the result of
a rapid expected deterioration in the dependence ratio and more severe WAP shrinkage.
That said, Germanys experience with very challenging demographics, and the contrast in
its economic performance relative to Japan, should underscore that the impact of
demography trends on price levels is not very clear cut, a point we explore in more detail
in Chapter 3.

FIGURE 12
Working age population trend after peak relative to Japans
post-peak experience

FIGURE 11
Trends in working age populations from relative peaks
Index= 100 at peak year
(next to country name)

Working age population (14-65)

Europe's working age population


Difference (%)
post-peak trend vs. Japan's
12
France
Spain
10
Belgium
Greece
8
Portugal
Germany
6
Netherlands
4
Austria
Italy
2

102
98
94

France 2077
UK 2071
EA ex Ger&Fra 2011
Germany 1998
Japan 1995

90
86

Years from peak


82
-20

-16

-12

-8

-4

Source: UN population statistics, Barclays Research

13 February 2014

12

16

20

0
Years after peak

-2
0

10

12

14

16

18

20

Source: UN population statistics, Barclays Research

This section is an excerpt from our recent Focus on January 27.

10

Barclays | Equity Gilt Study

FIGURE 13
Euro area countries demographic risk scorecard*
Working age population
Inflation
2013
Portugal
France
Spain

Avg. ann. %
change

Avg. ann.
% change

Last decade
(2003-2013) Peak year

0.4
1
1.5

0.02
0.43
0.84

Demographic
risk score

Dependency Ratio

Diff. from Japan (pp)

pp change over:

Diff. from Japan


(pp, reversed)

Pre-peak Post-peak Pre-peak Post-peak


Last
Next
decade
decade
decade
decade 2013 Last decade Next decade decade Decade

2008
2077
2011

2.62
0.61
12.63

-1.43
-0.15
-0.9

-3.23
-5.25
6.78

1.28
2.56
1.81

50.5
56.6
49.4

2.1
2.9
3.6

3.3
7.2
5

-10.3
-9.6
-8.8

6.8
3
5.1

5.3
4.8
4.7
3.8

Austria
2.1
0.32
2017
1.9
-2.62
-3.96
0.09
49
1.3
6.1
-11.1
4
Italy
1.3
0.24
2010
3.43
-2.18
-2.43
0.53
54.3
4.5
5.6
-8
4.5
3.7
Greece
-0.9
-0.17
2001
8.36
-1.41
2.5
1.3
52.3
4
5.7
-8.5
4.4
3
Belgium
1.2
0.6
2011
7.32
-1.71
1.46
1
53.9
1.5
7.7
-11
2.4
2.9
Nether.
2.6
0.13
2009
3.94
-2.14
-1.92
0.57
51.8
4
7.8
-8.5
2.3
2.6
Germany
1.6
-0.35
1998
2.92
-3.24
-2.94
-0.53
52.3
3.6
7.3
-8.9
2.9
1.3
Japan
0.4
-0.77
1995
5.86
-2.71
0
0
61.5
12.5
10.1
0
0
1
Note: *The calculation uses the dependency ratio of country X relative to Japans as a starting point. Then it adds the weighted contributions of the difference relative to
Japan in the post peak-decade growth in working age population and the change in the dependency ratio over the next decade. A final adjustment is made to account for
the difference in peak years in working age populations: +/-1 point for 10 years or more difference from the peak year of the euro area (2011). Source: Barclays Research

Monetary policy

Increasingly, monetary policy


in the euro area looks too tight,
just as it did in Japan toward
the end of the 1990s

Increasingly, monetary policy in the euro area looks too tight, just as it did in Japan toward
the end of the 1990s. 5 As noted in the previous section, a simple Taylor rule analysis
would suggest that Japans monetary policy was too tight for nearly 15 years, given the
underlying conditions in the economy (Figure 14). Using the same comparison for the
euro area, the Taylor rule suggests that monetary policy has been broadly appropriate
through much of the crisis period, but is beginning to slip toward being too tight, as was
the case at a similar point in the crisis in Japan (Figures 15). Indeed, since early 2013, as a
result of renewed economic weakness and a gradual decline in inflation, Taylor rates have
fallen back into negative territory. The two refi rate cuts and the introduction of forward
guidance have put a lid on money market rates, but the gap between the Euro OverNight
Index Average (EONIA) and the Taylor rate has widened consistently, suggesting that
monetary policy is now too tight. In addition, the ECBs balance sheet has contracted since
mid-2013 as a result of the Long-Term Refinancing Operation (LTRO) repayment. Of
course, this passive tightening can be seen as a partial (and ongoing) normalization of
financial markets, as international investors return to the European periphery and banks
gradually regain market access. Nevertheless, it could result in renewed weakness in
money growth that would be particularly damaging amid already very low inflation.
FIGURE 15
Eurozone monetary policy stance using simple Taylor rule

FIGURE 14
Japan monetary policy stance using simple Taylor rule
9

5
4

3
3

2
1

0
-3
89

91

93

95

Taylor rule

97

99
Call

Source: BoJ, IMF, Barclays Research

01

03

BoJ rate

05

-1
00

02

04
Taylor rule

06

08
EONIA

10

12
ECB rate

14

Source: ECB, European Commission, Barclays Research

See A simple Taylor rule suggests the ECB should ease policy more aggressively to avoid a 'Japanese scenario'
in the Global Macro Daily (21 January 2014).
5

13 February 2014

11

Barclays | Equity Gilt Study


Although there are significant differences between Japanese monetary policy at the onset of
deflation at the end of the 1990s (absence of a medium-term inflation target for the BoJ,
Asian crisis, and entry into recession) and the current situation in the euro area
(macroeconomic adjustment in peripheral countries), a simple analysis of past monetary
policy with the Taylor rule suggests that the ECB risks being late to counteract deflationary
forces, just as the Bank of Japan was during its lost decade. This supports the view that
monetary policy should be eased more aggressively, especially given that the current
contraction in the ECBs balance sheet is acting as a passive tightening of monetary policy.

The banking sector


Eurozone banks were slow to
recapitalize but have recently
stepped up their efforts

Eurozone banks were slow to recapitalize but have recently stepped up their efforts; the
asset-quality review (AQR) should help stem any further concerns. 6 As mentioned, the
absence of large equity-cross-share holdings in European banks suggests the balance
sheet holes created by the asset bubble decline were likely smaller than among Japanese
banks. Comparable NPL data, while an imperfect measure, support this view (Figure 16).
In terms of policy, in contrast to the Japanese experience, while the response to banking
sector problems at the aggregate European level has been slow, recapitalisations at the
country level, particularly in countries where property bubbles burst and problems were
particularly acute, were relatively fast. For example, Ireland first injected capital in the form
of preference shares in 2009. Furthermore, independent stress tests done at country level
in Ireland and Spain were aimed at balance sheet clean-up and recapitalisation. In
aggregate, around 290bn of taxpayer-funded capital was injected into European banks
between 2008 and 2011. Another 50bn was injected into Spanish banks in 2012. Banks
also raised capital privately and 10-15% of the EU banking system is currently under the
State Aid framework and undergoing forced restructuring.

If the ECBs optimistic view


proves correct, eurozone bank
balance sheet clean-ups will
occur 4-5 years sooner than
they were done in Japan

Meanwhile, the ECB strongly believes its upcoming comprehensive assessment will force
eurozone banks to fill in any further balance sheet gaps in the coming months. The
assessment involves the AQR, a stress test and a review of funding/liquidity positions and
is being conducted ahead of the ECB taking over as the single supervisor in November
2014. The AQR applies a common definition of non-performing loans, a common
methodology on the classification of restructured loans and looks at provisioning levels.
This should draw a line under the balance sheet clean-up process and show that the
capital raise since the beginning of the crisis is sufficient or that more must be done.
Admittedly, some countries such as Portugal and Italy may be candidates for further
recapitalization, but this is already well known and unlikely to be a source of systemic
stress for eurozone banks. Overall, it would suffice to say that the eurozone bank balance
sheet repair is well ahead of similar efforts in Japan in the early 2000s. Still, the drop in
eurozone lending growth was steeper and happened quicker than in Japan (Figure 17).

FIGURE 16
Non-performing loans look to be a smaller problem in the
eurozone than in Japan

FIGURE 17
Loan growth decline has been much faster and deeper in the
eurozone than in Japan

9%

12%

8%

10%

Japan (Since Mar 1990)

7%

8%

Europe (Since Jul 2007)

6%

6%

5%

4%

4%

2%

3%

0%

2%

-2%

Japan (since 1989)

1%

-4%

Europe (since 2006, actual / forecast)

0%
0

8
10
12
Number of years

Source: Datastream, Barclays Research

14

16

18

20

-6%
0

10

Years since peak


Source: Datastream, Barclays Research

See The ECB asset quality review, Jonathan Glionna, 11 October 2013 and The ECB comprehensive assessment
Germany, Jonathan Glionna, 10 December 2013

13 February 2014

12

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Inflation expectations
Long-term inflation
expectations are well anchored
in the eurozone, but shortdated expectations are shifting
lower and zero rates could
complicate the situation

Long-term inflation expectations are well anchored in the eurozone, but short-dated
expectations are shifting lower and zero rates could complicate the situation. Unlike Japan
in the 1990s, the ECB has various inflation expectations measures at its disposal. A list of
the measures typically used was included in a 2011 publication. 7 In recent months, the
ECB has maintained that inflation expectations remain firmly anchored, and has openly
contrasted this dynamic with Japans experience. We broadly agree, but there are parallels
with Japans experience in the late 1990s that bear watching. The ECB typically cites 5y5y
breakeven swaps in maintaining its view that long-run inflation expectations remain well
anchored. Although it is hard to argue against this view, short-dated inflation
expectations are beginning to shift down, if only modestly. Using the EUR HCPIx options
market, the cumulative probability that the market is pricing below zero inflation over the
coming year is nearly 20%, compared with just under 10% six months ago (Figure 18). By
contrast, 10y inflation expectations have not moved over the same period (Figure 19).
Although we do not have similar breakeven data for Japan, the de-anchoring of inflation
expectations in the late 1990s followed a similar pattern.
Another important consideration in comparing the effects of inflation expectations is
the impact of zero rates especially since the eurozone has only recently reached this
point. Recent economic research 8 has examined this problem extensively and
concluded that traditional monetary policy rules plus the zero-lower bound on interest
rates can create a stable long-run equilibrium that involves both deflation and
extraordinarily low policy rates, referred to as the unintended equilibrium. The
Japanese experience suggests the unintended equilibrium can be stable and difficult to
reverse. Figure 20 shows Europe has gradually drifted toward the unintended
equilibrium 9. The light blue dots in the figure represent the combination of inflation and
policy rates in Europe since 2009, compared to the dark blue dots representing precrisis values. The ECB has recently lowered policy rates to 25bp, the effective zero-lower
bound, but has yet to fully reverse disinflationary trends. If inflation and inflation
expectations in Europe begin to drift even lower, then the ECB may be forced into
further unconventional monetary policy or risk a Japanese-style outcome.

45%

1y tenor

40%
35%
30%
25%
20%
15%
10%
5%
0%
-6% to - -3% to 5%
2%
current

0% to
1%

3% to
4%

3m ago

6% to
7%

9% to
10%

6m ago

Note: Charts show probability distribution of annualised inflation over the


relevant tenor, as implied by zero-coupon inflation options and inflation swaps
(Note: the starting point of the period over which the probability is calculated
is determined with a 3-month lag, as per the convention in the inflation swaps
market). Source: Barclays Research

FIGURE 19
Probability distribution for eurozone inflation outcomes over
next 10 years: Longer-run inflation expectations more stable
Probability of Inflation in a given
bucket

Probability of Inflation in a given


bucket

FIGURE 18
Probability distribution for eurozone inflation outcomes
over next year: Inflation expectations are shifting lower

40%

10y tenor

35%
30%
25%
20%
15%
10%
5%
0%
-6% to - -3% to 5%
2%
current

0% to
1%

3% to
4%

3m ago

6% to
7%

9% to
10%

6m ago

Source: Barclays Research

See Inflation expectations in the Euro Area: A Review of Recent Developments, ECB Monthly Bulletin,
February 2011.
8
See Jess Benhabib, Stephanie Schmitt-Grohe, and Martin Uribe, 2001, The Perils of Taylor Rules, Journal of
Economic Theory, 96, 40-69. Also see James Bullard, Seven Faces of The Peril, Federal Reserve Bank of St.
Louis Review, September-October, 2010.
9
Global Macro Daily, 7 February 2014

13 February 2014

13

Barclays | Equity Gilt Study

China and Asia disinflation pressures


It would seem to hold that the effects of Chinas export surge should be smaller for the
eurozone than they were for Japan, but it is worth noting that the eurozone is facing both
domestic and global deflationary pressures. At the global level, core goods disinflation has
been in place since late 201110. A number of reasons have been cited for this, including
Chinas overcapacity, the yens plunge and the decline in commodity prices. We assume it is
probably all three and perhaps a few others. We also assume that no clear reason emerges
for this global disinflation trend to reverse in the coming months, and that the disinflation
pressures in global core goods prices has probably had some impact on eurozone price
levels (Figure 21).

What makes the eurozone different?


This next section focuses on three important differences between Japan and the eurozone,
each of which probably increases the potential for a prolonged period of deflation, at least in
certain parts of the eurozone, if not necessarily in the region as a whole.

The eurozone needs to be viewed as a collection of economies and markets


Regional factors are important
in assessing deflation risks,
especially given the absence of
a single financial market

To start, although the importance of monetary policy in establishing deflation risks makes
comparisons between Japan and the eurozone reasonable, any prognosis of deflation risks
for the eurozone must recognize the heterogeneous aspects of the eurozone economy
and financial market. This is especially true given that at the heart of the eurozone crisis is
a collection of internal imbalances that were allowed to build up for nearly a decade prior
to financial shock. Reversing these imbalances will naturally place some economies at
much higher risk of deflation than others. One simple illustration of this is to return to our
analysis of the eurozones monetary policy stance, but focus on how ECB policy is felt
across different eurozone countries. Figure 22 shows the relative monetary stance for
Germany, Spain and the overall eurozone using a Taylor rule framework. Prior to the crisis,
the eurozones single monetary policy framework, while broadly correct for the region,
was far too loose for Spain, yet too tight for Germany. Since then, the relative policy
stance has shifted sharply. Today, the appropriate policy rate for Spains economy is near
-4%. For Germany, the right policy rate is closer to +2%. In the event, the current policy
rate of near zero is too tight for the region as a whole, but only modestly so. Still, current
policy will only exacerbate deflationary pressures in Spain and other periphery countries,
and if left unchecked could start to raise deflation risks for the region as whole.

FIGURE 20
Short-term policy rates and inflation in the eurozone

FIGURE 21
Global core goods prices disinflation has affected eurozone

Nominal policy rate (%)


6
Euro Area
1999-2008
2009-2013

y/y %

Global core goods inflation

1.5

EA nonenergy industrial goods inflation

1.0

0.5

3
2

0.0

-0.5

0
-2.0

-1.0

0.0

1.0

2.0

Core inflation (y/y% chg)


Source: ECB, Eurostat, Haver Analytics, Barclays Research

10

13 February 2014

3.0

-1.0
04

05

06

07

08

09

10

11

12

13

Source: Haver Analytics, Barclays Research

See Keeping a lid on inflation in Global Macro Daily, 10 January 2014

14

Barclays | Equity Gilt Study

FIGURE 23
German equities have outperformed vs other EA markets

FIGURE 22
Relative monetary policy stance within the eurozone

0.50

2.4

%
10

2.2

8
6

0.45

2.0

0.40

1.8

2
0

0.35

1.6

-2

0.30

1.4

-4
-6

0.25

1.2
00

02

04

06

08

EZ Taylor
Spain Taylor

10

12

Eonia
Germany Taylor

Source: AMECO, Haver Analytics, Barclays Research

14

07

09
DAX v CAC (lhs)

11

13
DAX v IBEX (rhs)

Source: Bloomberg, Barclays Research

Of course, none of this would matter much for asset allocation purposes if the eurozone
were a single financial market, but it is not. While many equity investors view the
eurozone as a single market these days, the country-by-country variability has been huge
in recent years. Essentially, Germanys equity market has significantly outperformed
peripheral and most other equities, an outcome one can easily understand given
Germanys better growth and, as we have shown, more favourable monetary policy
backdrop (Figure 23). Similarly, while talk of a single government bond market has
increased since the start of the crisis, any euro bond solution is likely years away (if it
ever happens) and is likely to have little impact on the legacy of outstanding debt in
peripheral countries. In other words, for asset allocation purposes, understanding singlecountry deflation risks is just as important in assessing the risks for the region as a whole.

The eurozone has embarked on a markedly different fiscal path than Japan
Another big difference between Japan and the eurozone is the path of fiscal policy. In
Japan, aggressively expansive fiscal policy was at the core of the crisis response, pretty
much from the beginning. Indeed, since 1993, Japans cyclically adjusted fiscal deficit has
averaged nearly 6% of GDP annually, and remains near 10% today. The Abe government
is now aiming to half the primary deficit by FY14-15 and achieve a primary surplus five
years later (though there are significant doubts about whether this can be achieved).
Tight fiscal policy in the
eurozone has probably shaved
as much as 4% from GDP

13 February 2014

The eurozones fiscal policy response has been very different. After a prolonged period
of loose fiscal policy in the pre-crisis years (especially, but not limited to peripheral
countries), followed by a major round of fiscal spending in response to the crisis, the
eurozone has embarked on a policy of fiscal tightening in recent years. We estimate that
the euro area on average has cut its structural budget deficit by a sizable 3.2 % of GDP
over 2011-13, including significant cuts in several peripheral countries, such as Spain
(4% of GDP) and Greece (nearly 10% of GDP). There has been a long debate on the
fiscal multipliers, with a range of estimate between 0.5 and 2.0. Our best rough
estimate is somewhere around 1.2-1.3. This means that the impact of the fiscal
adjustment over 2011-13 has probably been between 3.5% and 4% of GDP. Figure 24
illustrates just how different the fiscal policy responses of Japan and eurozone have
been judged at similar starting points for the crisis.

15

Barclays | Equity Gilt Study

FIGURE 24
General government cyclically adjusted fiscal balance
% of GDP
0
-2
-4
-6
-8
-10
-12
92

93

94

95

96

Japan

97

98

99

00

01

02

03

Eurozone: start = 2007

Source: Haver Analytics, Barclays Research, OECD

The good news for the eurozone is that fiscal consolidation will be much slower from
2014 onward. We see a negative impulse from fiscal policy of 0.3% of GDP in 2014,
0.2% of GDP in 2015 and 2016 and 0.1% in 2017. The structural deficit would be more
or less eliminated by the end of the decade. That said, when thinking about current
deflation risks, we need to consider the effects that the fiscal austerity to date has had
on economic conditions. One way of thinking about this is to return to the comparative
output gaps between Japan and the eurozone at a similar point of the crisis (Figure 2).
We have argued the aggregate asset price and banking shocks have not been quite as
large in the eurozone as they were in Japan, but the impact of tight fiscal policy on
many eurozone countries has helped push the output gap deeper, and at a much earlier
point than was the case in Japan. Once the drastically different fiscal policy response in
the eurozone is taken into account, we would argue that the risks of a period of
deflation, certainly for many peripheral countries and perhaps for the region as a whole,
are not that different to the risks Japan was facing in the mid-1990s.

Some deflation is actually part of the solution to the eurozone crisis


A final distinction between the eurozone and Japan, and perhaps the most important
one is that in the eurozone, some temporary deflation within the region is an
unfortunate, but natural by-product of solving the eurozones crisis. In other words, in
the absence of exchange rate devaluations (a route the euro makes impossible for
peripheral countries), internal devaluation is needed by many eurozone countries to
regain competitiveness. 11
Credit-fuelled growth in several member states in the previous cycle meant that the
fundamental features of member states economies were overlooked (eg, efficiency of
the labour market, product markets, public services). Lack of efficiency implied that
labour costs grew much faster than productivity, in turn implying a significant
deterioration in unit labour costs (ULC). Peripheral countries were particularly affected
between the start of EMU and the beginning of the financial crisis in 2007.
Crisis-hit countries have reacted with a raft of reforms, including wage and price
moderation and, where possible, a shift from labour taxes to consumption taxes. This socalled internal devaluation aims to depreciate the real effective exchange rate by
realigning labour costs with productivity, thereby restoring competitiveness and, as a
result, unwinding current account deficits, a first step toward a sustainable growth path
for these economies.

11

13 February 2014

Internal devaluation increases deflation risks Global Macro Daily, 30 January 2014

16

Barclays | Equity Gilt Study


This adjustment has occurred in various forms and at various speeds. In some countries,
ULC correction has occurred mainly via productivity gains through labour shedding, at
least in a first step (eg, Ireland, Spain, Portugal). Elsewhere, or as a second step, it has
resulted from a fall in labour costs, ie, compensation per employee (Ireland, Greece and,
more recently, Spain). An increase in productivity coupled with a fall in wages has pushed
ULCs sharply lower. Amid falling producer prices and shrinking domestic demand,
inflation has declined, and even turned negative in Ireland, Greece and Cyprus.
Countries in which the internal devaluation has been more successful are generally
those where structural reforms have also been readily implemented. The intensity of
reforms has been strongest in Ireland, Portugal, Spain, and, to some extent, Greece. By
contrast, France and Italy have fallen behind in the reform race.
It is important to bear in mind that internal devaluation and, more significantly,
structural reforms, imply a de facto alteration of (if not a break with) previous pricesetting relationships. For example, as far as the Phillips curve (relationship between
nominal wage growth and unemployment rate) is concerned, there is no way to know
whether labour market reforms imply a different equilibrium point on the same curve or
whether the curve has actually changed shape. Even if the reform agenda in all these
countries were only partially implemented, the price adjustment would likely continue
for several more years. The picture is particularly negative for France and Italy.
Assuming that unit labour cost differentials with Germany return to their 2004 levels, it
would imply a relatively aggressive ULC adjustment to take place over the next four
years for these two countries (Figure 25).
Continuing competitiveness
adjustments help explain euro
area inflation weakness

Net-net, continuing competitiveness adjustments are playing an important role in


explaining euro area inflation weakness. This is a fundamental difference with the
Japanese situation in the 1990s. Indeed, it is important to understand and monitor the
eurozone-specific variables at play, and their effect on consumer prices, in order to
assess the deflation threat in the region, and within each eurozone country. Put another
way, the weakest countries in the EA are undertaking structural reforms and an internal
devaluation process that, if successful, may enhance total factor productivity (TFP),
growth potential and eventually prices. As in the weaker EA countries, a key factor
behind Japans great stagnation was a story of declining TFP and failure to address its
roots Abes third arrow (structural reform) is about precisely that. On this account, as
well as on the comparatively quicker clean-up of zombie banks in the periphery, Europe
appears to have reacted faster and more forcefully than Japan, but at the expense of
higher near-term deflation risks.
FIGURE 25
Marked ULC adjustment lies ahead for France and Italy
Q1 04 = 100

Germany
France
Italy
Spain
Ireland
Greece
Portugal

130
125
120
115
110
105

Projections

100
95
90
85
80
99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

Source: Haver Analytics, Barclays Research

13 February 2014

17

Barclays | Equity Gilt Study

Dont underestimate the risk of eurozone deflation


In this section, we assess the risks of a prolonged bout of eurozone deflation along with
likely trends and key focus points within the region. Overall, our assessment is that the
risks of a region-wide deflationary period are significant, and certainly bigger than what
is currently priced into financial markets or being publically acknowledged by eurozone
policymakers. Either way, the likelihood of a prolonged period of falling price levels in at
least several eurozone countries looks very likely.
Figure 26 summarises our analysis of the similarities and differences when comparing
Japans deflation era to the eurozone situation today. Below are the key takeaways:

The early-stage drivers of Japans deflationary shock are nearly all present in the
eurozone today, although in most cases the impact is likely to be less severe, at least in
any region-wide assessment of eurozone deflation risks.

Asset price deflation in the eurozone has been more modest in the aggregate, although
house/land price falls in some peripheral countries are comparable to Japans episode.

Negative demography is unlikely to be as acute as the trend in Japan.


Bank capital impairment has been addressed more quickly in the eurozone, and 2014 is
expected to put a lid on further bank balance sheet concerns.

The real effective euro exchange rate has not been as big a driver of the deflation trend,
but it is an increasing drag on prices.

Against this, important differences in the eurozone today likely suggest the deflation
risks do not differ meaningfully from Japan in the mid-1990s.

Tight fiscal policy has pushed the eurozone output gap to levels more negative than they
were in Japan at a similar stage of the crisis.

Uneven monetary policy (too tight in periphery, too loose in Germany), along with
ongoing internal devaluations have pushed several countries into deflation already. (It
should be noted that although internal devaluation in the periphery and semi core on the
back of structural reforms will contribute to near-term deflation risks, if successful it
should have longer-run positive implications for growth and inflation.)

Global disinflation pressures remain relatively large, thanks at least in part to weak
commodity prices, Chinas overcapacity and a weak yen.
FIGURE 26
Japan vs the eurozone: A summary of the important similarities and differences
Deflation factor

Likely Impact on price levels

Japan's experience

Eurozone today

Financial/asset price
shock

large negative

large early driver

medium early driver

Demographics

unclear, but likely small


negative

probably medium, early shock to price


levels

impact should build from here, but still


unclear and likely small

Monetary policy
stance

large/medium negative

large impact, especially after Japan


entered deflation

turning tight for eurozone, entering a


critical stage in 2014

Bank capital
impairment

large/medium negative

large early driver

An important early driver, but bank recaps


have picked up; 2014 critical

Inflation expectations medium negative

medium impact once Japan entered


deflation (hard to track)

short-end expectations falling; entering a


critical stage

Real exchange rate


appreciation

medium negative

probably medium, early shock to price


levels

real effective euro unchanged over period

Global disinflation
pressures

medium negative

low/medium in 2000s

a medium driver of disinflation in past two


years

Fiscal policy

medium negative

expansionary/inflationary

probably medium/large deflationary shock

Intra-regional
monetary policy

large/medium negative

n/a

large negative shock for peripheral


countries

Internal devaluation
measures

large/medium negative

n/a

Large negative shock for peripheral


countries

Source: Barclays Research

13 February 2014

18

Barclays | Equity Gilt Study


In considering the country-by-country risks, we use a synthetic indicator replicating the
IMF methodology 12. The assessment is made on answers to a series of closed-ended
questions equally weighted by country/region scores: 1 if a given series breaches a predefined threshold, and 0 if not. The higher the score, the higher the deflation risk (for
more details, see Sensing the deflation risk, Euro area focus, 17 May, 2013).
Figure 27 looks at the evolution of this deflation risk indicator for the eurozone as a
whole and a few important countries, while Figure 28 shows the details by country. We
summarize the important messages below:

The eurozone-wide deflation risk indicator has crossed into the high territory for
the first time since Q4 2009, although it is still at the lower end of this range.

Unsurprisingly, the peripheral country deflation risk scores are very high and more
recent data suggest deflation risks have picked up again (after easing a little).

Understandably, deflation risks in Germany and most other northern eurozone


countries remain comparatively low, although perhaps not low enough given
the need to offset deflationary pressures in the periphery related to ongoing
internal devaluations

France and Italy are both still in the modest risk zone, but more recent data
suggest deflation risks are building; given how far behind these countries are in
restoring competitiveness, deflation risks are clearly to the upside
FIGURE 27
Deflation vulnerability index for selected euro area aggregates
1.0
0.9
0.8

Euro Area
Greece, Portugal, Spain, Cyprus, Slovenia (18%)

HIGH

Italy, France (39%)


Germany (27%)

0.7
0.6
0.5
0.4
0.3
0.2

MODERATE
LOW

0.1
0.0
Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Source: Haver Analytics, IMF, Bloomberg, Barclays Research. Note: in brackets, the weight of the grouping in the
euro area HICP basket. Greece is missing before 2011

12

Deflation: Determinants, Risks, and Policy Options Findings of an Interdepartmental Task Force, IMF,
April 2003

13 February 2014

19

Barclays | Equity Gilt Study

FIGURE 28
Deflation risk indictor for eurozone and individual countries
Latest
EA

DE

FR

IT

ES

NL

BE

EL

PT

FI

IE

SL

LU

CY

EE

MT

Is CPI inflation < 0.5%?

Is GDP inflation < 0.5%?

Is core inflation < 0.5%?

Has the output gap increased > -2% past 4 quarters?

Is the output gap lower than -2%?

Is GDP growth in the last 3y < 2/3 previous 10y?

Has equity index declined by > -30% past 3y?

Has the real exchange rate appreciated more than >


4% past 1y?

Is annual credit growth < annual nominal GDP


growth?

Has cumulative credit growth < 10 % past 3y?

Is broad money growing slower than base money <


2% for the last 2 years?

Total (arithmetic average)

0.55 0.20 0.30 0.40 0.50 0.40 0.30 0.80 0.60 0.30 0.50 0.50 0.30 0.80 0.50 0.30

Headline HICP inflation rate

0.7* 1.2* 0.8 0.6* 0.3* 1.4 1.2 -1.8 0.2

1.9 0.4

0.4 1.5 -1.3 2.0

1.0

Note: * refers to flash January data. Data otherwise refer to December prints. Source: Barclays Research; IMF

2014 a critical year for the eurozone deflation verdict


Overall, the eurozone is entering a critical stage in determining whether it will avoid a
bout of region-wide deflation (existing deflation trends in individual member states look
set to persist). Regional considerations aside, today is much like Japans crucial 1996-97
period. Then, the combination of significant shocks, negative demographics,
undercapitalized banks and an expensive exchange rate left Japan on the cusp of
deflation. While these deflationary forces are not as large in the eurozone today, the
added deflationary pressures from tight fiscal policy, tight monetary policy (regionwide, and certainly in some countries), internal devaluations and global disinflationary
pressures means the eurozones risks are not meaningfully different than they were in
Japan in 1996-1997.
In the end, Japan did fall into deflation in the late 1990s and remained there for more than 15
years. That said, it appears that a series of policy mistakes, a related de-anchoring of inflation
expectations and some bad luck is what finally sealed Japans deflation case. The eurozone
looks in many ways quite similar to Japan in the mid- 1990s. According to our Taylor rule
estimate, monetary policy is, for the first time, too tight, if only modestly so. Shorter-dated
inflation expectations are shifting lower, while longer-dated expectations remain anchored
(a pattern observed in Japan). And bank lending remains depressed, despite some reason for
optimism around eurozone bank recapitalization efforts.
Recent ECB policy response is
reassuring, but more may be
needed to curb deflation risks,
especially in case of additional
financial or economic shocks

If there is one important lesson for eurozone policymakers from Japans experience, it is
that the next year or two will likely be critical in curbing deflationary pressures. As Japan
has shown, one element in avoiding deflation will likely be luck. Given the eurozones large
negative output gap, the region can ill afford any further financial or economic shocks.
That said, aggressive policies to avoid deflation may also be needed. Reassuringly, the
bank balance sheet clean-up is well under way. The ECBs early reaction of recent
disinflationary pressures is also a cause for optimism, if only modestly so. Looking ahead,
more monetary policy easing may be needed, and with interest rates already virtually at
zero, the options left for the ECB are not especially attractive ones from the banks point of
view (ie, negative deposit rates, some form of QE, etc.)
As noted, our assessment on eurozone deflation is that the risks are high, but not yet
high enough to call it our central scenario. During this critical next year or two, the path
of ECB policy will be key, as will the behaviour of banks as balance sheets are repaired.
As important will be developments at the country level. We expect internal devaluations
underway in many peripheral countries to remain a deflationary force for some time.

13 February 2014

20

Barclays | Equity Gilt Study


Assuming competitiveness vis--vis Germany is restored to 2004 levels, we would
expect internal devaluation pressures to be in place over the next few years, particularly
stemming from a needed adjustment in France and Italy.
Ultimately, developments in Germany, France and Italy may well hold the key as to
whether region-wide deflation is avoided. While Germanys deflationary pressures are
very modest, the truth is that German inflation levels are running too low to offset the
major deflation pressures in the periphery simple math would argue Germany needs
an inflation rate above the eurozones 2% target to offset deflation pressures elsewhere
(current Germany CPI is 1.2% y/y). France and Italy deflation risks are higher than
Germanys. Given neither have really begun to restore competitiveness, we would
expect deflation risks to only rise in the coming few years. How and when this process
unfolds will be a crucial determinant of deflationary risks for the eurozone.

The impact of deflation on asset allocation choices


We build on Japans experience to consider the potential consequences for eurozone
markets and asset allocation were deflation to become reality. We focus on five areas. First,
we consider how asset allocation between equity and fixed income could change in a
deflationary environment. Second, we analyse the potential effects on bank behaviours and
valuations. Third, we look at the potential impact of deflation on the euro. Fourth, we
simulate what deflation might mean for eurozone debt sustainability, all else equal. Finally,
we consider the linkages between deflation/low rates and corporate behaviour.

Deflation has had a marked effect on Japanese asset allocation


As we have written before 13, inflation can significantly alter the optimal asset allocations
for a portfolio of equities and fixed income in a given currency. Chapter 6 (Shifting
inflation landscapes: Implications for Japan and Europe) takes a more detailed look at
the effects of inflation levels on asset allocation. In considering the risks of a prolonged
bout of deflation in the eurozone, we make the following points.
First, it should come as no surprise that an optimal asset allocation strategy markedly
changes depending on the inflation regimes. Figures 29 and 30 look at Sharpe ratios for
equity and fixed income returns in the US since 1970. For equity markets, the riskadjusted returns are fairly symmetrical (and bell shaped). At the two extremes low
inflation/deflation and high inflation equities perform poorly. This suggests that there
is an inflation sweet spot for equity nestled somewhere between super-low and
super- high inflation outcomes. By contrast, the picture for fixed income returns across
inflation regimes is far more linear the lower the inflation (even deflation) the better
FIGURE 29
Average US equity performance across inflation deciles
1.0

Equities : Sharpe ratios vs. CPI deciles

0.8
0.6
0.4
0.2
0.0
-0.2
1

9
5
6
7
8
10
CPI deciles =>
Sharpe ratio
Average CPI per decile: RHS
2

Source: Bloomberg, Barclays Research

14%

1.5

12%

1.0

12%

10%

0.5

10%

8%

0.0

8%

6%

-0.5

6%

4%

-1.0

4%

2%

-1.5

2%

0%

-2.0

Treasuries : Sharpe ratios vs. CPI deciles

Sharpe ratio

14%

0%
5
6
7
8
9
10
CPI deciles =>
Average CPI per decile: RHS

Source: Bloomberg, Barclays Research


13

13 February 2014

FIGURE 30
Average Treasury performance across inflation deciles

The Japan macro trade: Watch Japanese investors in 2014, Global Macro Daily, 11 December 2013

21

Barclays | Equity Gilt Study

FIGURE 31
Average Sharpe ratio for Japanese assets across inflation
regimes

FIGURE 32
Government pension fund allocations and GPIF planned
allocation shift

Sharpe Ratio

Total assets $bn


2012

Equity

3721

35%

55%

7%

3%

UK

2736

45%

37%

17%

1%

US

16851

52%

27%

20%

0%

31%

20%

1%

1
Japan

0.8
0.6
0.4

Non Jpn

0.2

26033

49%

Total assets $bn

Equity

GPIF (June 2013


allocation)

1212.4

27%

68%

5%

GPIF near term


target

1212.4

30%

65%

5%

GPIF 1-2yr target

1212.4

39%

56%

5%

0
-0.2
-0.4
-0.6
Tsy

Slope [2-5]

Average since 1994

Slope [5-30]

Low inflation

Source: Bloomberg, Barclays Research

Equity

Bond Other Cash

Bond Other Cash

High inflation
Source: Tower Watson, Bloomberg, Barclays Research

the returns for fixed income, and vice versa. As Japan exits deflation for the first time in
nearly 20 years, and the eurozone flirts with entering deflation, the implications could
be significant. In the case of the eurozone, a bout of deflation (or even a prolonged
period of very low inflation) would argue strongly for an asset allocation overweighting
fixed income and underweighting equities.
A look at the Japan deflation experience illustrates how large asset allocation
differences can be depending on the level of inflation. Figure 31 looks at annualized
Sharpe ratios during Japans deflationary era for various government bonds, slope
trades and equities. We also show Sharpe ratios during periods of above and below
median lagged inflation. As one would expect, Japans deflationary period strongly
favoured a large overweight in fixed income and an underweight in equities. Fixed
income returns were largely the same in either low inflation or deflationary periods, but
equity returns were clearly different depending on the deflation outcome (down in
below-median periods for inflation, up otherwise). Interestingly, it would also seem that
deflation, or, more likely, zero interest rates, had a discernible impact on curve trade
returns. Most notably, short-end fixed income bull flatteners were far more successful
in Japan than other countries during the period studied.
There is compelling evidence
that deflation significantly
altered Japanese investors
asset allocation mix

As to whether these scenarios had a meaningful impact on asset allocation decisions, a


comparative glimpse of Japans pension industry should dispel any doubts. Figure 32
shows pension allocations for a cross-section of countries including Japan. By 2012, 15
years after Japan fell into deflation, Japanese pension funds fixed income weightings
were 20-25% higher than in other countries. Meanwhile, equity weightings were
significantly smaller, by around 15-20% of overall assets. As Japan exits deflation, GPIF
(Japan largest public pension) has recommended a radical shift away from fixed income
and toward equity (bottom of Figure 32). It is unlikely that European asset allocators
will consider such a radical shift (away from equity) were deflation to become reality.
Still, deflation would challenge a general consensus that equity is cheap and bond yields
too low, especially given European asset allocations are not especially overweight fixed
income, or underweight equities at least not in a Japan sense.

Eurozone banks have already priced a Japan-style scenario


Two key consequences of Japans asset shock(s) and deflationary environment were
the marked change in the behaviour of Japanese banks and the significant market derating of Japanese banks in absolute and relative terms. In terms of bank behaviour, we
highlight two important trends during the post bubble/deflation years. First, Japanese
banks purchased a significant amount of domestic government debt. Second, banks
shrunk their loan books as demand for credit was weak. This combination significantly
13 February 2014

22

Barclays | Equity Gilt Study

FIGURE 33
Composition of Japanese bank assets: Significant shift
toward government debt holdings during deflation era

FIGURE 34
Composition of eurozone bank assets: No discernible
change in bank asset composition at euro-wide level

100%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

0%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Loans

Government securities

Source: Bank of Japan, Barclays Research

Others

0%
98

00

02
Loans

04

06

Govt securities

08

10

12

Others

Source: European Central Bank, Barclays Research

altered the mix of assets on Japanese bank balance sheets over time. As discussed
above, overweighting government debt was a rational decision in an environment of
deflation and weak loan demand. But given the importance of banks to the economy,
the behavioural shift also exacerbated the deflationary trend. Figure 33 shows the
evolution of this asset shift at Japanese banks government debt as a percent of total
assets grew from 5% in 1998 to a peak of 25% in 2011. Meanwhile, loans fell from a
peak of 60% of total bank assets when the bubble burst in 1990, to just 40% today.
Looking at eurozone banks, there is only modest evidence that banks are shifting their
asset mix away from loans and into government bonds (Figure 34). Holdings of
government debt across the eurozone banking system have risen from a low of 4% in
2008 to around 6% today. This is below peak levels of 8% in 1999 (and clearly well
below the peak for Japanese banks of 25%). That said, in peripheral countries where
bank stress has been bigger and deflation pressures much clearer, shifts in asset
composition have been more prevalent. For instance, government bond holdings make
up about 9% of total bank assets in Spain, three times the amount in 2008 (though still
below the late 1990s peak of 12%). Moreover, bank balance sheets are shrinking as
banks deleverage, which means the actual drop in loans is even bigger than asset
shares suggest. Net-net, it is probably safe to assume that banks have added to the
deflationary pressures, and may well continue to do so for some time.
A second impact of Japans asset and economy-wide deflation was on absolute and
relative valuations for Japanese bank equities (Figures 35 and 36). From a peak of 20%
of total equity market capitalization, Japanese banks dropped to just 6% of the total
market in 2001, just before Japans FSA, under the leadership of Heizo Takenaka, began
an aggressive program to revitalize banks. Meanwhile, price-to-book ratios of Japanese
banks fell from a peak of more than 2 in 1993 to barely today still near the cycle
bottom despite the clean-up of banks in recent years. On a relative basis, Japanese
banks price-to-book ratios are about half of the market as a whole, having been
roughly equal at the peak in 1993.
Over the past two years,
eurozone bank valuations have
improved markedly, but
remain well below the peaks
of 2006

13 February 2014

For eurozone banks, valuation adjustments (down) were both early and aggressive.
Similar to Japanese (and US) banks, eurozone bank capitalization peaked at about 20%
of the market in 2006, then more than halved just three years later. Price-to-book ratios
were near 2 in 2006 (same as Japanese banks in 1993), but then dropped to below 1/2
after the collapse of Lehman Brothers. Over the past two years, eurozone bank
valuations have improved markedly, but remain well below the peaks of 2006. The
stepped-up efforts to recapitalize banks would argue the risks to eurozone bank
equities remain to the upside. That said, the experience of Japanese banks over the
23

Barclays | Equity Gilt Study

FIGURE 35
Bank equity market cap as a % of the total market

FIGURE 36
Absolute price-to-book ratio of banks

22%

Japan (Peak Aug 1993)

20%

Europe (Peak Mar 2006)

Japan (Since Aug 1993)

2.5

Europe (Since Mar 2006)

2.0

18%
16%

1.5

14%
12%

1.0

10%
8%

0.5

6%
4%
0

10

0.0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Years after MV Peak Share

Years after MV Peak Share

Source: Datastream, Barclays Research

Source: Datastream, Barclays Research

deflationary period, despite a significant clean-up of their balance sheets, argues that
the risks may be more finely balanced. A very low interest rate environment, coupled
with deflation risks and an unfriendly regulatory backdrop will make for a difficult
environment for eurozone banks.
What deflation and super low rates would mean for eurozone bank credit is less clear.
During the Japan experience, bank credit performed reasonably well, certainly relative to
bank equities. Japanese banks were always liquid from excess deposits; therefore, debt
performed well. It is not clear, however, that the same capital structure differentiation
would occur in Europe. This is because regulators in Europe are more willing to impose
losses on bondholders, whereas in Japan this was still taboo. Policies like the Bank
Recovery and Resolution Directive and the Single Resolution Mechanism could cause
the outcome for European bank bondholders to be much worse off than was case for
Japanese bondholders, if a deflationary scenario occurs.

Deflation would likely be an upside risk for the euro


One parallel drawn between the present euro-area situation and Japans in the 1990s is
the coincidence of a large current account surplus and a strong currency. A common
view is that Japans current account surplus was the cause of the JPYs appreciation,
which in turn reinforced deflationary pressures.
FIGURE 38
EUR/USD FX rate has tracked real interest rate
differential

FIGURE 37
Current account balances in Japan and eurozone at
comparable points in the crisis
% of GDP; deviation from pre-crisis 4y average
2
Japan
Euro Area

%
4

EA-US real 3m differential (LHS)

EURUSD
1.6

1.5

2
0

1.4

1.3

-1

1.2

-1

Source: Bloomberg, Barclays Research

13 February 2014

t+120

t+96

t+84

t+72

t+60

t+48

t+36

t+24

t=0

t+12

t-12

1.0
t-24

-3
t-36

t+40

t+36

t+32

1.1

t+108

Quarters from crisis start (t=0)

t+28

t+24

t+20

t+16

t+8

t+12

t+4

t=0

t-4

t-8

t-12

t-16

-3

-2
t-48

-2

Months from crisis start (t=0)


Note: real 3m differential = 3m interest rates minus 12m trailing inflation
(y/y). Source: Bloomberg, Barclays Research

24

Barclays | Equity Gilt Study


However, the circumstances are not directly comparable. Japan entered its crisis with a
structural current account surplus in excess of 2% of GDP and a currency still in trend
appreciation from its pre-Plaza Accord undervaluation. The euro area began the Global
Financial Crisis with its current account roughly in balance and its currency near alltime highs. Figure 37 plots each economy's current account balance in percentage
points of GDP as a deviation from the four-year pre-crisis average to remove the
structural portion of the balance. The horizontal axis denotes the crisis timeline in
quarters, with t=0 at December 1989 for Japan and July 2007 for the euro area.
The patterns are quite different from both the conventional wisdom about Japans
experience and from each other. Japans surplus actually shrank on average, relative to its
pre-crisis level. Rather than Japans surplus causing JPY appreciation, a closer analysis
suggests that changes in the JPYs value drove fluctuations in Japans surplus (ie, currency
strength suppressed the surplus, weakness boosted it). Conversely, aside from a brief swing
to deficit immediately following the crisis onset, the euro areas current account surged to
surplus as the European crisis intensified and imports compressed with domestic demand.
While the euro exchange rate rise in the past year has coincided with the surge in the
euro-area current account surplus, it has actually correlated far better and we would
argue been driven more by real interest rate differentials. Figure 38 shows EUR/USDs
relationship with the real interest rate differential between the euro area and the US. In
contrast, USD/JPY was uncorrelated with US-Japan real interest rate differentials for
most of its crisis period (Figure 39).
The more troubling aspect of the EURs tighter relationship with real interest rates is that it
appears increasingly to be driven by inflation dynamics in the post-crisis, zero-nominalrate world. The increase in correlation between EURUSD and real rate differentials is
noticeable in Figure 38 following the onset of the crisis. More broadly, the strengthening
of real interest rate effects on FX can be seen in Figure 40, which charts the correlation of
nominal effective exchange rate returns with nominal and real interest rates for six
currencies with near-zero policy rates. The correlation of FX returns to real interest rates
has increased sharply in recent years. This is coincident with deviations of inflation in
those economies from their average levels (Barclays blue line, inverted).

The real interest rate


differential explains much of
the euros strength

The threat is that with policy rates already pinned at zero, if the ECB fails to stem the
present trend of euro-area disinflation, the associated rise in real interest rates has the
potential to become a self-reinforcing mechanism of deflation through currency
appreciation. However, we believe that the ECB has both the tools negative deposit rates
and balance-sheet expansion and the will to defend against further disinflation.

FIGURE 39
USD/JPY link to real rate differential has been less tight
%
6

USDJPY
200
180

160

140
0

FIGURE 40
G10 currencies increasingly linked to real rate differentials
0.8
0.6

corr. coef.

%ppts

0.2
0.0
-0.2

t+120

t+96

t+108

t+84

t+72

t+60

t+48

t+36

t+24

-0.8
2000 2001 2003 2004 2006 2007 2009 2011 2012
Nominal Rate Correlation (LHS)
Real Rate Correlation (LHS)
Inflation Deviation (Inverted, RHS)

t=0

80
t+12

-4
t-12

-0.6

t-24

100
t-36

-2

t-48

-0.4

US-JN real 3m differential (LHS)

USDJPY (RHS)

Note: real 3m differential = 3m interest rates minus 12m trailing inflation (y/y).
Source: Bloomberg, Barclays Research

13 February 2014

-2

0.4

120

Months from crisis start (t=0)

-3

-1
0
1
2
3

Note: Near-zero economies are the euro area, Japan, Sweden, Switzerland,
the UK and the US. BoE NEER is used to calculate monthly FX returns;
correlations are taken with 1y nominal and real interest rates, smoothed over
6 months. Source: Bloomberg, Barclays Research

25

Barclays | Equity Gilt Study

Deflation would exacerbate already tenuous peripheral debt sustainability


The potential for deflation to exacerbate debt burdens is well documented. In Japans
case, this was especially true given the huge primary fiscal deficits the government ran
through much of the deflationary period. All else equal, deflation also implies shrinking
nominal GDP, therefore an increasing debt/GDP ratio. Figure 41 compares the evolution
of Japans public debt/GDP against a hypothetical path if Japan had been running 2%
inflation throughout its deflationary period. The difference is a real debt burden about
30% below current levels. Admittedly there is little Japan can do about the past, but it is
easy to understand from this analysis why PM Abe and the Bank of Japan are so keen to
combine fiscal consolidation with positive inflation to help stabilize government debt.
On the surface, debt
sustainability looks less
problematic for the eurozone

On the surface, comparisons of debt sustainability between Japan and eurozone would
imply far less concern for eurozone debt. According to the OECD, gross general
government debt in Japan was near 250% of GDP at the end of 2012, compared with a
little above 100% for the eurozone. And as we have discussed already, the fiscal policy
paths are markedly different. The eurozone is expected to have achieved a cyclically
adjusted primary fiscal balance in 2012, while Japan has run a persistent, sizable
primary deficit every year since 1993. Still, as eurozone policymakers were reminded in
2011-12, the markets perception of debt sustainability can be fickle. In addition, unlike
Japan where more than 90% of all government debt is held locally, peripheral eurozone
bond markets still depend heavily on foreign participation. Finally, it is worth
remembering that Japans gross general debt was just 90% of GDP in 1996, a similar
point to where the eurozone stands today. Indeed, in those countries where debt
sustainability is truly a concern, debt-to-GDP ratios are already at quite worrying levels by end-2013, we estimate that debt to GDP stood at 133% in Italy, 94% in Spain, 130%
in Portugal, 124% in Ireland, and 173% in Greece.
A debt sustainability analysis (DSA) is a useful tool to evaluate whether a country will
be able, under current policies, to meet its public debt commitments over the medium
term without restructuring. While there is not one single definition of solvency, a
country is deemed solvent if its public debt-to-GDP ratio declines over the medium
term under plausible macroeconomic assumptions. Therefore, any DSA is only as
relevant as the macroeconomic inputs used in it.
Figure 42 shows the long-term debt-to-GDP dynamics for Italy and Spain under a
baseline macroeconomic scenario consistent with the 2014-15 dynamics described in
our latest European Economics Quarterly. The scenario described in the EEQ extends
only through 2015; therefore, we make further assumptions on the medium term and
long-term macroeconomic outlook to extend the analysis. Specifically, we have
assumed for Italy that, over the medium term, nominal growth converges toward 2.6%

FIGURE 41
Japans government debt: Actual vs a 2% inflation scenario

FIGURE 42
Public debt dynamics on a knife edge in Italy and in Spain
% of GDP

JPY trn

140

1,200
1,000

120

800
600

100
Spain
80

Italy - lower inflation 2014-18

2049

2045

2041

2037

2033

2025

2021

40

2017

2012

2010

2008

2006

2004

2002

1998

2000

Real debt (1995 prices)

Italy

60

2012

Nominal debt

1996

1994

1992

1990

1988

1986

1984

1982

1980

Spain - lower inflation 2014-18

2008

200

2029

400

Real debt (2% inflation)


Source: Eurostat, Barclays Research

13 February 2014

Source: Eurostat, Barclays Research

26

Barclays | Equity Gilt Study


by 2018 (roughly 1.1% real GDP growth and 1.5% inflation), from 1.4% in 2014 (0.8%
growth and 0.6% inflation). We expect the primary balance to sustain a surplus, on
average, of 3% of GDP over the long term. We also assume that average funding costs
on all outstanding public debt would very gradually increase from about 3.7% by end
2013 to 5% by 2026 and stay at that level through 2050 (assuming a sovereign spread
of around 200bp). For Spain, we assume that long term nominal growth (2018-50)
would be slightly higher at 3.0% (1.5% real GDP growth and 1.5% inflation), but the
primary surplus would be 100bp lower than Italys at 2% of GDP (as we expect that
Spain will still be running a primary deficit of over 2% of GDP in 2014). We assume the
same long-term funding cost for Spain (5% from 2026 onward) as the starting point for
funding costs and public debt maturity profile are fairly similar to Italys ie the average
cost on all public debt stood at 3.75% with an average maturity of debt of 6.2 years.
Under current assumptions
Italy and Spain are just about
solvent .

Under those assumptions, public debt in Italy and Spain just about stabilizes over the
long term. For Italy, public debt falls slightly over the next few years but then stabilizes
at around 127% of GDP, as average funding costs gradually increase. As for Spain,
public debt peaks in 2017 at about 106% of GDP and then stabilizes at around 104%
over the medium term. Note that Spains debt dynamics, unlike Italys, should continue
to worsen for the next four years given the more adverse starting point for its primary
balance (debt would nonetheless peak at a lower level in Spain than Italy given the
lower initial debt stock and somewhat better growth prospects).

but a deflation shock could


tip the balance

To see how shocks have an impact, we assume a modest, negative temporary shock to
inflation of 50bp for 2014-18, which would put Spanish inflation solidly in negative
territory and Italian inflation close to flat. Public debt would peak in Spain at 108% and
over the long term it would stay at around that higher level. For Italy, it would also
result in public debt failing to fall materially and would stay at around 134% over the
long term, basically at about the same level as in 2013. Alternatively, if we were to
assume a 50bp fall in long-term inflation that would push nominal growth down to
2.0% in Italy (or down to 2.5% in Spain) it would require a permanently higher fiscal
effort of similar order of magnitude for public debt to stabilize (ie, about 50bp additional
primary surplus), assuming steady-state real GDP growth unchanged, otherwise public
debt/GDP would fail to stabilize over the long-term.
Net-net, in a persistent, low growth environment in peripheral European countries, a
bout of deflation would be a very unwelcome addition with respect to debt
sustainability. Assuming a 60% recovery, markets today put the probability of default
for peripheral debt at somewhere between 3% (Ireland and Spain) and 7% (Portugal),
from as high as 40% (Portugal) a few years ago. Given the relative size of foreign
ownership, these numbers would probably begin to look a tad low if the deflationary
pressures in these countries were expected to persist for a sustained period.

Corporate behaviour and the feedback loop on Japans deflation


The behaviour of corporate executives and investors may also have contributed to the
deflationary impulses in the Japanese economy. By investing heavily in fixed assets and
corporate capacity, Japanese companies have contributed to a persistent excess of
aggregate supply over demand, with predictable consequences for prices. As Figure 43
demonstrates, the share of fixed investment spending within the Japanese economy has
been consistently above that of the eurozone, by an average of more than 3pp of GDP.
Although the gap had shrunk to 1pp by the end of 2010, the onset of the sovereign
debt crisis in Europe has further constrained investment there. Meanwhile, investment
has once again expanded as a share of Japanese GDP.

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FIGURE 43
Gross fixed capital formation in Japan has far exceeded that of the eurozone
% of GDP
30%
28%
26%
24%
22%
20%
18%
16%
14%
12%
95

97

99

01
Japan

03

05

07

09

11

13

Euro Zone

Source: OECD, via DataStream

By international standards, the returns achieved on investment in the Japanese


corporate sector have been low. Even allowing for the influences of different
depreciation rates, tax schedules and interest charges, EBITDA returns in Japan have
consistently underperformed those in Europe. Over the period for which we are able to
source these data, EBITDA returns for Japanese non-financial companies have averaged
380bp less than those in Europe. The persistence of these low returns suggests
investors are willing to accept a lower rate of return on investment in Japan than in
Europe, but there may also be an element of self-fulfilment as further fixed investment
drives down returns and exerts downward pressure on prices. Moreover, by investing in
such low-returning businesses, Japans ageing population has foregone higher returns
overseas, and will need to save more to achieve the same level of pension provision.
Persistently high investment spending has contributed to a trend decline in the rate of
capacity utilisation at Japanese firms (Figure 45). Indeed, even now the rate of
utilisation is around 10% below the average of the past 30 years. The lower rates of
investment spending in the eurozone mean that utilisation levels are now close to their
average levels. Excess capacity of this kind may also have contributed to the overall
deflationary impulse in Japan. Overall, overinvestment by Japanese companies has likely
exacerbated the deflationary trend and attributed to unattractive valuations for
Japanese equities. Neither seems an especially big risk for the eurozone today, given
modest investment levels pre-crisis (certainly compared with Japan) and the significant
decline in investment since.

FIGURE 44
EBITDA returns in Japan have lagged eurozone

FIGURE 45
Capacity utilisation levels remain low in Japan

16%

% difference from mean utilisation rate


20

14%

10

12%

% Return

10%

-10

8%

-20

6%

-30

4%
2%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Japan
Source: DataStream

13 February 2014

Europe ex-UK

-40
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Japan

Euro Zone

Source: Director General for Economic and Financial Affairs

28

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Bibliography
External Research
1. Deflation: Determinants, Risks, and Policy Options Findings of an Interdepartmental
Task Force, IMF, April 2003.
2. Deflation in a historical perspective, Michael Bordo and Andrew Filardo, Bank for
International Settlements, Working Paper 186.
3. Back to the future? Assessing the deflation record, Claudio Borio and Andrew J
Filardo, Bank for International Settlements, Working Paper 152.
4. Will the US and Europe avoid a lost decade? Lessons from Japans post crisis
experience, Takeo Hoshi & Anil K. Kashyap, International Monetary Fund, 14th
Jaques Polak Annual Research Conference, 7-8 November 2013.
5. Chronic Deflation in Japan, Kenji Nishizaki, Toshitaka Sekine, Yoichi Ueno, Bank of
Japan Working Paper Series
6. The Perils of Taylor Rules Journal of Economic Theory, 96, 40-69. Jess Benhabib,
Stephanie Schmitt-Grohe, and Martin Uribe, 2001
7. The seven faces of The Peril, James Bullard, Federal Reserve of St. Louis Review,
September/October 2010
8. Inflation expectations in the Euro Area: A Review of Recent Developments, ECB
Monthly Bulletin, February 2011

Barclays Research
9. Sensing the deflation risk, Euro area focus, Francois Cabau, 17 May 2013
10. Are European Banks going Japanese?, Simon Samuels, 3 May 2012
11. The ECB comprehensive assessment Germany, Jonathan Glionna, 10 December
2013
12. The ECB asset quality review, Jonathan Glionna, 11 October 2013
13. What's the difference between Japan and the US? 31 August 2011

13 February 2014

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CHAPTER 2

Introducing the SCAPE: Why US equities are


less expensive than they seem
Michael Gavin
+1 212 412 5915
michael.gavin@barclays.com

Comparisons of equity-market valuations across countries are complicated by


substantial differences in sectoral composition. We propose an approach to
adjust for the measurement distortion created by these differences, and a
valuation metric that we think better isolates country or regional factors from
compositional influences.

With a few exceptions, compositional effects make non-US equity markets appear
cheaper (using the cyclically adjusted PE as valuation metric, and relative to the US
market) than they would seem after accounting for the effect of sectoral
composition. For the UK, for example, the compositional effect accounts for nearly
3 points of the 6-point difference between the UK and US CAPEs. The difference is
even larger for Spain, Italy, and several emerging equity markets.

Our measure of the sector- and cyclically-adjusted PE ratio (SCAPE) suggests that
most non-US markets are still cheaper than the US; only Japan and Mexico appear
more expensive under this metric. But the gap between the US and the rest of the
world is in general meaningfully smaller than the unadjusted CAPE suggests.

Sector adjustment of national equity markets


Investors who would like to assess relative value of national equity markets from a topdown perspective face at least two practical problems. The first is that corporate
earnings are volatile and sensitive to transitory influences of the economic cycle.
Unadjusted price-earnings ratios can therefore fluctuate wildly in response to
temporary cyclical fluctuations in earnings, the denominator of the ratio. The most
common approach to this problem is Robert Shillers cyclically adjusted PE (CAPE),
which divides the equity price by a 10-year average of (inflation-adjusted) earnings per
share, on the supposition that the 10-year average will smooth out short-term cyclical
fluctuations and provide a better estimate of longer-term underlying earnings power.
The CAPE is not a panacea, but it is a useful and widely accepted refinement of the
conventional PE that we use throughout this paper as we focus on a second problem.
The second problem stems from the fact that the regional or national equity markets
that investors might like to compare can have very different sectoral compositions. For
example, the energy sector comprises 9% of the MSCI world market capitalization, but the
sector accounts for only 1.2% of the market in Japan and is completely absent in Germany
(Figure 1). At the other extreme, energy accounts for 57% of Russias total market
capitalization. Globally, the financial industry accounts for 21% of advanced market and
25% of emerging market capitalization, but the sector ranges from roughly 15%
(Germany and the US) to nearly 40% (Spain and China) and even higher (Hong Kong).
Moreover, investors tend to attach different multiples to earnings in different sectors.
For example, energy, financials, materials and utilities sectors tend (for reasons that
need not concern us here) to trade at lower multiples, while the consumer discretionary
and telecom sectors tend to trade at higher multiples to (cyclically adjusted) earnings
(Figure 2).

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FIGURE 1
MSCI market capitalization (% of total)
Telecom Materials

Consumer
Consumer
staples
discretionary

Energy

Financials

Industrials

Healthcare

Technology

Utlilties

MSCI world
(advanced markets)

9.0%

20.7%

11.7%

4.5%

5.4%

10.4%

US

9.9%

15.8%

10.7%

2.7%

3.3%

10.0%

13.6%

10.4%

11.8%

3.3%

13.4%

12.2%

19.1%

World ex US

8.0%

25.4%

12.6%

6.4%

7.4%

2.8%

10.6%

13.6%

8.4%

4.5%

3.8%

Japan

1.2%

18.7%

17.7%

7.9%

5.5%

6.6%

22.6%

6.0%

11.6%

2.2%

UK

15.5%

22.8%

7.0%

7.9%

9.5%

17.0%

7.7%

7.9%

1.1%

3.7%

Euro area

6.4%

20.8%

13.9%

5.3%

6.7%

12.1%

16.2%

6.7%

5.0%

7.0%
3.6%

Germany

0.0%

13.5%

14.1%

5.2%

11.0%

5.8%

27.6%

11.5%

7.7%

France

8.4%

18.4%

17.3%

4.2%

5.8%

12.0%

15.0%

8.6%

2.9%

7.4%

Italy

27.0%

31.6%

9.6%

4.0%

0.0%

0.0%

9.7%

0.0%

0.0%

18.1%

Spain

5.1%

39.3%

10.1%

11.5%

0.0%

0.9%

16.0%

1.6%

3.0%

12.5%

Emerging markets

13.8%

25.4%

6.7%

9.7%

9.4%

10.0%

7.3%

1.7%

11.8%

4.3%

China

11.1%

37.0%

5.8%

17.2%

2.6%

6.7%

4.5%

1.1%

10.2%

3.7%

Hong Kong

0.0%

49.0%

13.4%

1.3%

0.0%

0.0%

25.5%

0.0%

0.5%

10.3%

Taiwan

4.2%

17.9%

4.0%

7.1%

13.2%

3.0%

6.3%

0.3%

44.1%

0.0%

India

17.9%

16.1%

5.5%

4.6%

6.8%

12.1%

6.0%

6.2%

19.1%

5.6%

Korea

2.7%

13.9%

13.7%

3.2%

9.5%

4.9%

17.4%

0.6%

31.3%

2.9%

Brazil

14.0%

25.6%

4.7%

3.6%

15.6%

23.6%

3.3%

0.6%

3.1%

5.9%

Mexico

0.0%

16.2%

12.0%

15.6%

18.9%

30.9%

5.6%

0.8%

0.0%

0.0%

Russia

56.7%

16.0%

0.0%

11.6%

8.5%

5.4%

0.0%

0.0%

0.0%

1.7%

South Africa

9.4%

28.9%

3.0%

14.7%

14.1%

5.4%

18.1%

6.5%

0.0%

0.0%

Source: MSCI

FIGURE 2
Cyclically-adjusted PE (CAPE) by sector
Aggregate Energy Financials Industrials Telecom Materials

Consumer Consumer
staples discretionary Healthcare Technology

Utilities

MSCI world
(advanced markets)

19.5

13.6

12.2

22.0

19.8

17.1

24.4

28.8

23.6

26.9

14.2

US

21.7

16.2

13.8

23.1

19.7

20.5

24.0

33.3

23.8

27.0

15.3

World ex US

17.4

10.8

14.3

21.2

19.7

15.7

24.9

24.3

23.7

26.8

13.3

Japan

25.4

13.4

25.3

21.0

25.2

18.6

32.0

31.7

23.5

29.5

76.5

UK

15.7

9.9

10.3

27.6

52.3

13.1

22.0

21.8

16.3

55.4

16.9

Euro area

14.2

8.9

7.7

21.6

10.4

17.9

24.6

20.1

27.8

32.4

8.6

Germany

18.0

na

10.1

22.7

30.8

21.0

26.8

20.6

35.0

37.4

5.9

France

14.5

8.9

10.2

23.4

9.4

13.1

23.1

17.5

21.3

na

10.6

Italy

10.3

8.8

10.3

14.7

8.5

na

na

22.3

na

na

8.5

Spain

10.6

8.1

7.0

17.7

8.7

na

na

44.0

na

27.3

11.2

Emerging markets

13.7

7.3

13.2

14.3

14.6

10.5

29.9

19.0

31.7

20.7

15.4

China

14.4

11.2

13.1

12.8

14.2

10.3

25.4

16.1

15.9

70.4

23.3
16.3

Hong Kong

13.2

na

11.7

13.4

31.9

na

na

30.9

na

na

Taiwan

17.6

na

19.9

18.0

16.9

14.1

38.9

24.8

na

17.4

na

India

19.2

12.9

18.7

15.7

4.1

9.1

45.7

25.1

34.8

34.1

8.3

Korea

15.3

13.6

12.0

14.2

9.9

9.6

19.9

18.5

na

20.4

75.9

Brazil

10.0

5.4

11.8

16.6

10.5

8.2

na

15.8

na

29.1

8.6

Mexico

21.4

na

23.4

42.0

13.9

16.2

35.8

21.9

na

na

na

Russia

7.0

4.9

13.5

na

16.2

9.6

90.4

na

na

na

0.5

South Africa

18.4

13.8

14.4

13.4

21.8

11.1

25.5

40.0

45.1

na

na

Source: MSCI, Barclays Research

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FIGURE 3
Both in the US and in other advanced markets, cyclicallyadjusted multiples vary systematically across sectors

MSCI EM
35

MSCI World
ex US

30

Consumer
staples

25

Technology
Consumer
discretionary

Telecom

20

10

15

Telecom

20

25

MSCI US
Source: MSCI, Barclays Research

30

35

Industrials

Financials

10

Energy

10

Technology
Utilities

15

Materials

Utilities

Consumer
staples

30

20

Industrials
Financials

Health care

25

Healthcare

15

FIGURE 4
EM and advanced market CAPEs are less strongly, but still
highly correlated across sectors

Consumer
discretionary

Materials
Energy

5
5

10

15
20
25
MSCI world (advanced markets)

30

35

Source: MSCI, Barclays Research

The variations in relative sectoral valuation are not identical across national and regional
markets, at least in part because these broad sectors are themselves agglomerations of
diverse subsectors with potentially very disparate valuation contexts; for example, in one
country, consumer discretionary may be filled with mature industries like automobiles
and in another it may comprise high-fashion retailers. But there is enough commonality
in relative sector valuation across regions to identify a strong sector factor. In Figure 3,
for example, we compare the cyclically adjusted PE by sector in the US (horizontal axis)
and other advanced equity markets (vertical axis). The correlation is about 85%.
Emerging and advanced markets are less highly correlated, but still exhibit a strong
positive correlation (Figure 4).
A country whose equity market
contains a high proportion of
companies in sectors that
attract low multiples may
appear inexpensive, even if
valuations are expensive on a
sector-by-sector basis

The combination of systematic differences in sectoral valuations and substantial


differences in the market composition complicates cross-country comparison of equity
market valuations. A country whose equity market contains a particularly high
proportion of companies in sectors that attract low multiples may appear inexpensive,
even if valuations are expensive on a sector-by-sector basis, simply because the
national index is dominated by the companies in sectors that tend to trade at low
multiples both at home and globally.
This is not a new problem, but we are unaware of a systematic approach to minimizing its
effects, analogous to the CAPE method of mitigating the effects of transitory cyclical
fluctuations in earnings. In this note we propose one, and discuss how a sector- and
cyclically-adjusted PE ratio (SCAPE) sheds new light on relative equity market valuations.

Sector adjustment in principle: The problem and a solution


Suppose an investor is trying to determine whether a certain equity market or group of
markets is cheap or expensive relative to some other reference market. We focus here
on the cyclically-adjusted price-earnings ratio as the valuation metric of interest
(although there is no reason why other metrics, such as the unadjusted PE or the pricebook ratio could not also be sector-adjusted). The investor might sensibly begin by
examining the difference between the earnings yield in the target market (which is the
inverse of that countrys PE or CAPE if cyclical adjustment of the earnings is desired
and which we denote by E) and that of the reference market (which we denote by ) 1.
1

For detail-oriented readers, in this example and in the application below, we work with the cyclically-adjusted
earnings yield rather than its reciprocal, the CAPE, because the sectoral earnings yields aggregate to the overall
markets earnings yield if we compute a market-capitalization weighted average of the sectoral data. The PE (or
CAPE) does not. One example of the practical problems that result from trying to average PEs rather than the
earnings yield is what happens in the common case when earnings are temporarily very low in one sector and
the PE is therefore very high. This very large PE will tend to dominate calculations of the weighted-average PE

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A national or regional equity markets aggregate earnings yield can be written as the
weighted average of the sectors earnings yields, where the correct weighting factor is
the share of the sector in total market capitalization. With a little arithmetic, and using
to denote the share of sector i in total market capitalization, the difference between
the earnings yield at home and in the reference market can be written like this:
1)

( ) + (
) + ( )
=

The second term on the right side of this equation is the potential problem. It shows that a
market can appear cheap (that is, the aggregate earnings yield, E, can be higher than in
the reference market) because it is more heavily weighted in sectors that tend to attract
higher earnings yields (lower multiples), even if valuations in each individual sector are
equal to those of the target market. In a case like this there is a sense, of course, in which
the market of interest is genuinely cheaper than the reference market, but this stems only
from sector factors and does not reflect the country or regional valuation factors that
analysts tend to associate with differences in national market valuation.
The first term of the equation suggests ways to correct for this problem and isolate
regional from sectoral drivers of valuation. One is to compute the (weighted) average
difference of valuations by sector, and use this average as a measure of the target
markets valuation:
2)

= + (
)

Unlike a comparison of unadjusted CAPEs, this valuation measure will differ from the
reference market only to the extent that individual market sectors are on average cheap
or expensive; it is not distorted by compositional effects. An essentially identical
formulation is to compute the overall valuation metric as a weighted average of the
sectoral valuation metrics, but using the reference countrys weights rather than the
actual weights in the aggregation.2 In the application below, we call this the sector- and
cyclically-adjusted PE ratio, or SCAPE.
The advantage of the SCAPE is that sectoral composition is largely removed as a driver of
valuation differences, creating a potentially more accurate measure of the relative richness
or cheapness of various regional markets. Its main disadvantage is that the results will be
sensitive to the reference market selected. We discuss this practical problem below.

Sector adjustment in practice


Although straightforward in principle, computation of the SCAPE involves some decisions
that require discussion. The first of these is selection of the reference market against
which other markets are to be compared. Several possibilities come to mind, including the
global equity market, advanced markets, or the US. The US equity market has the
advantage that its size and liquidity make it a focal point of many globally oriented
investors, regardless of location.
The question of how to position in the US vs other global markets comes up frequently
enough to make the US market a natural benchmark in many circumstances, though not
all. Unlike a number of other national equity markets, the US market has the considerable
advantage for our purposes of possessing substantial representation of all 10 sectors.
Countervailing these advantages is the fact that the sectoral composition of the US
market is somewhat unusual in the heavy weight of technology, and the correspondingly
reduced representation of companies in the financial, telecom, and materials sectors. In
the end, we decided that investors familiarity with and the salience of the US equity
market trumps this disadvantage, and have used the US market as the reference market.
and drive that average away from the conventionally-computed aggregate PE. Cyclical adjustment of earnings
mitigates this problem, but does not remove it. The correct solution is to average the earnings yield or,
equivalently, to compute the harmonic rather than the arithmetic average of the sectoral PEs. Although our
computations use the cyclically-adjusted earnings yield, we express the results in terms of its inverse, the CAPE,
because it is in more common use.
2
The main difference between these formulations of the SCAPE is how missing sectors are treated.

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A second practical problem that arises in application is the fact that not every national
market contains listed companies in each sector. For example, as we have noted, the
German market contains no companies in the energy sector. The Italian index lacks
companies in the materials, consumer staples, health care and technology sectors, and
the market is as a result disproportionately concentrated in the energy and financial
sectors. Some emerging markets are similarly, or even more concentrated. We really
have no choice here but to compute the weighted average in equation (2) using the
sectors that actually exist in the national or regional market of interest.
Finally, in some advanced and emerging markets, the index contains listed shares in a
given sector, but we have some reason to fear that the sector is not representative. For
example, a few emerging markets have very small healthcare sectors, sometimes of
quite recent vintage and with valuations that are out of line with the rest of the market.
This sector may matter very little in the conventionally computed national aggregate,
but its inclusion could create a large distortion in the computation of a SCAPE that gives
relatively high weight to the healthcare sector. To reduce this problem, we introduced
three filters, including in our analysis only those sectors for which: 1) earnings data are
available for at least eight of the past 10 years; 2) the sectors market capitalization is at
least 1% of the aggregate market capitalization; and 3) the 10-year average of inflationadjusted earnings per share (used to compute the CAPE) is positive.3
With these preliminaries behind us, we present in Figure 5 our estimates of the SCAPE,
along with the conventional PE and the CAPE for comparison, for a number of the larger
equity markets. The EPS and CAPE are computed using aggregate EPS and share prices
for the national or regional market as a whole, and we use MSCI data throughout.
FIGURE 5
Alternative valuation metrics
PE

CAPE

Composition
effect

SCAPE

19.0

19.5

-0.8

19.4

US

17.6

21.7

0.0

21.1

ex-US

19.7

17.4

-1.6

19.0

Japan

17.3

25.4

0.7

24.4

UK

16.6

15.7

-2.7

18.0

Euro area

23.8

14.2

-1.0

15.3

Germany

15.9

18.0

0.8

19.4

France

23.5

14.5

-0.3

14.2

Italy

100.0

10.3

-3.4

11.9

Spain

62.1

10.6

-3.3

13.2

11.8

13.7

-2.6

15.8

China

10.0

14.4

-3.9

17.2

Hong Kong

11.1

13.2

-1.9

16.0

Taiwan

22.1

17.6

-0.6

20.4

India

17.7

19.2

-1.7

18.8

Korea

17.8

15.3

1.4

15.6

Brazil

13.1

10.0

-4.6

12.3

Mexico

22.6

21.4

-1.3

25.2

Russia

5.1

7.0

-0.6

4.6

S Africa

17.8

18.4

-1.2

19.3

Advanced markets

Emerging markets

Note: Latest data are for Dec 31, 2013. Source: MSCI, Barclays Research

The 10-year average of earnings is designed to smooth cyclical fluctuations and provide a better estimate of
underlying, trend earnings power. When the average is negative, the 10-year history is likely to be a poor estimate
of future earnings power. An example, although it does not fail the non-negativity test in recent months, is
Japanese utilities. This sector suffered enormous losses in the years after the 2011 earthquake. Until recently, these
losses were large enough to make the 10-year average of earnings negative. In recent months, earnings have
recovered to the point where the 10-year average is positive, although the 10-year average is still very low by
comparison with pre-earthquake earnings, and probably by comparison with future earnings potential. This
explains why the CAPE for Japanese utilities is anomalously high (Figure 2).

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The first point that emerges from the results is somewhat technical, but nevertheless
requires comment because it bears upon interpretation of the findings in Figure 5.
Conceptually, the CAPE and the SCAPE should be the same for the reference market (in
this note, the US), because both measures aggregate sector data using the reference
markets sector weights. But in our results, there is a small difference between the CAPE
and the SCAPE for the US: the CAPE is 21.7 and the SCAPE is 21.1.
The explanation for this lies in a difference in the ways in which earnings are aggregated
and averaged over time in the two metrics. In the CAPE, (inflation-adjusted) historical
earnings are aggregated across sectors and the total is then averaged over a 10-year
window. In the SCAPE, on the other hand, inflation-adjusted earnings in each sector are
first averaged over the 10-year window, and the resultant sector-specific CAPEs are then
aggregated using the most recent (in this case, December 2013) sector weights. We see
no reason to believe that one of these methods is conceptually preferable to the other,
and the difference is not large; the point is that they differ slightly, which means that the
difference between the CAPE and the SCAPE is not solely due to the compositional effects
that we emphasize in this note.

Sector effects generally make non-US equity markets appear cheaper


The unadjusted CAPE tends to
give the impression that the
countrys equity market trades
at a larger discount to the US

The third column of Figure 5 provides a direct measure of the composition effect on
cyclically-adjusted PE (this is essentially the second term in equation (1)). For most of the
markets we analyze, this effect is negative, which means that the composition of these
equity markets is skewed (by comparison with the reference market, the US) toward
sectors that tend to trade at relatively low multiples. The unadjusted CAPE thus tends to
give the impression that the countrys equity market trades at a larger discount to the US
than it would if the effect of sector composition were taken into account. The effect is
substantial for advanced markets, where the composition effect is worth 1.6 points, or
37% of the difference between the US and the other advanced markets CAPEs. It is even
larger for emerging markets in absolute terms.
The main driver of this compositional measurement distortion is the larger share of
companies in the financial sector and the smaller share of technology firms in most
markets, relative to the US. In a number of countries, eg, the UK, Italy, India, Brazil, and
especially Russia, the high share of financials is compounded by a high share of energy
companies in the national market. In the UK, sectoral composition accounts for nearly 3
points of the 6-point difference between its CAPE and that of the US. The sector effect is
even larger in Spain, Italy, China and Brazil.
In a few markets, the sector effect is of the opposite sign. In Japan, for example, the effect
is positive (although not large), because the impact of a large financial sector is offset by a
very small energy sector and by a high share of firms in the telecom and consumer
discretionary sectors, where valuation multiples tend to be high. Korea combines small
financial and energy sectors with large consumer discretionary and technology sectors.
The German market is a slightly special case, discussed in more detail below, whose most
distinctive feature is the very large consumer discretionary sector (reflecting in part that
countrys large auto industry). In these three countries, the unadjusted CAPE therefore
makes the market look more expensive than it would appear after taking compositional
effects into account.

The US equity market premium is smaller than it seems


As measured by the unadjusted CAPE, US equity market valuations are second only to
Japans, and appear substantially more extended than in other advanced markets.
However, we have noted that a substantial part of that valuation gap reflects sector
composition effects, rather than a true national or regional risk premium. We have
already highlighted the UK market, where sector-adjustment cuts the gap between the
national and the US CAPE from 6 points to 3. In China the gap is cut from almost 7.5
points to less than 4. And in Germany, sector adjustment cuts the valuation gap from
nearly 4 points to less than 2 points. In all of these cases (and in all of the countries that
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we investigate except Japan and Mexico, see Figure 5) the SCAPE still shows the US
market to be more expensive, but by a substantially smaller margin than the unadjusted
CAPEs would suggest.

Is the German market, cheap, expensive, or both?


The German case highlights the importance of taking into account sector valuations,
and shows some of the limitations of the SCAPE approach. As Figure 6 shows, some
sectors of the German equity market (technology, health care, and telecoms) trade at
substantially higher cyclically-adjusted multiples than in the US. Other sectors
(consumer discretionary, utilities, and to a lesser extent financials) trade at
meaningfully lower multiples than in the US.
FIGURE 6
Sectoral CAPEs are relatively high in parts of the German market, low in others
Technology
Health care
Telecom
Consumer staples
Materials
Industry
Financial
Utilities
Consumer discretionary
Energy
-20

-10

0
Germany vs US

10

20
Germany

30

40

US

Note: There are no energy companies in the German MSCI. Source: MSCI, Barclays Research

If we want to determine whether the German market as a whole is cheaper or more


expensive than the US, we need to decide on a weighting scheme. If we use German
market capitalization (as does the unadjusted CAPE), the German market appears
quite inexpensive, mainly because of a very high weight for consumer discretionary. If
we use US market weights (as does the SCAPE method described here), the German
market looks substantially less inexpensive because the US market has a smaller
weight for consumer discretionary (where Germanys market is much less expensive
than the US) and a higher weight for technology (where the German market is much
more expensive).
This is an example of what economists like to call an index number problem. In
cases like this, there really is no universally correct answer to the question of
whether (or by how much) German equities are cheaper or less expensive than the
US (or some other) market. 4 It depends upon the weighting scheme adopted and,
since weighting schemes are to some extent arbitrary (or at least contextdependent), no single scheme can offer a definitive answer for all circumstances.
But, as is often the case when no definitive answer exists, the question is to some
extent beside the point. What the SCAPE analysis highlights in this case is the fact
that German vs US equity valuations are very sector-dependent; in this sense, the
German market is both cheap (in some sectors) and expensive (in others). This
suggests that the logical next step in an analysis of how much value the German
market offers would be sector-specific as well, focusing, for example, on specific
challenges and opportunities facing German banks, utilities and auto producers
4

The very attentive reader may note that the problem that we discuss here is different from either the first (pure
valuation) or second (pure sector composition) terms of equation (1), above. In terms of that equation, it is one
of the second order terms, because it deals with the cross-product of differences in sector weights and in sector
valuations. Second-order terms tend to be smaller than first order terms, but there is no guarantee that they will
not be significant in any concrete application.

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rather than trying to quantify the size of and outlook for a country or regional risk
premium that would affect the market as a whole. Sometimes, getting the question
right is an important part of the analytical battle; expecting more of any singlenumber framework may be unrealistic.

Emerging markets: Mind the gap


Although the sector composition of equity markets varies significantly among the
advanced markets, emerging equity markets are even more varied and compositional
effects even more significant. Generally speaking, emerging equity markets are
concentrated in low-multiple sectors, particularly the financial and energy sectors. In
China, the financial sector alone accounts for roughly 37% of the aggregate market
cap. The combination of finance and energy accounts for nearly half of the Chinese and
Hong Kong market caps, 34% in India, 40% in Brazil, almost 73% in Russia, and nearly
40% in South Africa.
Adjusting for the effects of these compositional differences leaves emerging markets
looking less expensive than the US market but not, in most cases, much less expensive
than equity markets outside the US and Japan. And even compared with the most
expensive of advanced markets, the valuation gap is substantially reduced. At 17.2, for
example, the Chinese SCAPE is not only substantially higher than the unadjusted CAPE,
but also within a point or two of the UK (18.0) and German (19.4) SCAPEs, and well above
the euro area average.
The composition effect is largest in Brazil, where the market is heavily weighted in the
financial, energy, and utility sectors. These three low-multiple sectors comprise more than
45% of the Brazilian market cap, and we estimate the compositional effect on valuations
at more than 4.5 points. However, even after accounting for this compositional effect, the
Brazilian market is inexpensive on the basis of its cyclically-adjusted PE; our estimate of
the SCAPE is 12.3, well below the average of 16 for emerging markets. The Brazilian CAPE
is low predominantly because earnings have plunged in the past couple of years, and
investors seem sceptical about an economic and earnings recovery, and are therefore
unwilling to look through the decline as a short-lived cyclical phenomenon.
Compositional effects make the market appear even cheaper, but the measurement
distortion is not now the main driver of the depressed market valuation.

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CHAPTER 3

Economic implications of demographic


change
According to United Nations projections, a demographic revolution has been

Michael Gavin

under way for more than half a century and will likely take several more
generations to complete. Yet China and the more advanced economies, which
account for the vast majority of the worlds economic and financial activity, face
an important inflection point, similar to the ones that confronted Japan and
Germany in the mid-1990s: population growth is decelerating sharply and, in
China and much of the economically advanced world, is turning negative.
Moreover, dependency ratios are rising, after a long period of stability or decline.

+1 212 412 5915


michael.gavin@barclays.com
Tal Shapsa
+1 212 526 9982
tal.shapsa@barclays.com

We highlight four ways in which this inflection point, as well as disparities within
the multi-generational trend, could affect the next decade: 1) complicate the task
of fiscal consolidation, mainly through a rise in age-related public spending. The
good news here is that the most heavily affected economies are not the fiscally
stressed economies of the eurozone; 2) support the process of economic
rebalancing in China while magnifying the challenge of shifting the economy away
from its investment-led development pattern; 3) complicate the debt dynamics
of southern Europe, where population growth is poised to turn negative; and 4)
potentially tilt the terms of trade in favour of labor in the US, after two decades in
which labor income lagged returns to capital.

However, contrary to what Japans experience might seem to suggest, we do not


think demographics will be the decisive influence on the balance between
inflationary and deflationary forces in the decade to come.

Whats happening to populations?


Humankind is living through its most momentous demographic transformation in
recorded history, though it will likely take several more generations before a new steady
state emerges. In the meantime, the investment landscape will continue to be
conditioned by the gradual and uneven transition to a new equilibrium.
There are many elements of continuity in the dynamics set to form the backdrop for
economic developments in the decade ahead. Populations will continue to age, as they
have mostly been doing for half a century, and population growth will continue to slow. In
FIGURE 1
Life expectancy has been rising in emerging and advanced
economies

FIGURE 2
Fertility rates have declined

Years

Children per woman

80

7
6

70

5
60

50

3
2

40
30
1955

1
1965
Developed

1975

1985
China

Source: UN, Haver Analytics, Barclays Research

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1995

2005

2015

Less developed ex China

0
1955

1965

1975

Adv economies

1985
China

1995

2005

2015

Other emerging

Source: UN, Haver Analytics, Barclays Research

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FIGURE 4
The world is getting older but emerging economies will
remain relatively young (% of population older than 65)

FIGURE 3
The worlds working age population will rise more slowly,
but fall in the existing centers of world economic activity
Bn persons

6.0

25

5.0

20

4.0

15

3.0
10

2.0

1.0

0
1950 1960 1970 1980 1990 2000 2010 2020 2030

0.0
1950 1960 1970 1980 1990 2000 2010 2020 2030
Six manufacturing powers

Developed

World

Note: The six manufacturing powers are the US, China, Japan, the euro area,
the UK, and Korea Source: UN, Haver Analytics, Barclays Research

Emerging

World

Source: UN, Haver Analytics, Barclays Research

some ways, the next 10 years should look a lot like the past 10. But in other respects,
populations are facing an inflection point that could shift the economic and financial
context significantly.

The population revolution in a nutshell


Population change is fundamentally about birth and death, and in the past half-century
both have been transformed in most of the world. Improvements in health care,
reflecting rising living standards and improved technology, have led to large rises in life
expectancy in most advanced and emerging economies. At the same time, prosperity,
technology and, in some cases, policy, have led to a large fall in birth rates.
These fundamental drivers have created a population dynamic that is being felt globally
(although with important differences that we discuss below): after rising rapidly in
response to falling mortality rates, the decline in the birth rate eventually leads to a
population that grows more slowly as it steadily ages.

FIGURE 5
Dependency ratios will rise significantly in advanced economies but continue to fall in
much of the emerging world
Dependents per
person of working
age
90

Global dependency ratios

80
70
60
50
40
30
Africa

Asia ex JP
and CH
1990

LatAm

China
2000

US
2010

Euro area
2020

East.
Europe

Japan

2030

Source: UN, Haver Analytics, Barclays Research

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The dependency ratio conventionally defined as the ratio of the number of young
(below 15 years of age) and elderly (65 and older) persons to those of working age (1564) tends to follow a U shaped path, declining in the early stage of the demographic
transition as the lower birth rate reduces the number of children needing support. Later
in the transition, the rising share of the elderly leads to a rise in the dependency ratio.
In the past two decades, the dependency ratio has been either stable (US, euro area) or
declining (emerging markets, including China) in most of the world, with the major
exception of Japan, where the dependency ratio has risen significantly in the past decade.
This interplay between falling birth rates and rising life expectancy is about as universal an
influence over world development as exists, and on a long enough time horizon,
population dynamics are likely to be marked by a strong common thread. But on a more
immediately relevant (although still extended) time horizon of 10-15 years, the landscape
is far more variegated, and the influence of population dynamics on the world economy
and financial markets is likely to reside less in broad global tendencies than in the specific
developments and circumstances in the more economically influential regions.
FIGURE 6
Japan and Germany are the oldest societies; Africa and EM Asia are much younger
% total

Elderly population (above 65)

35

2012

2032

30
25
20
15
10
5

Japan
Germany
Italy
Greece
Portugal
Austria
Belgium
Spain
France
UK
Netherlands
Czech Republic
Ukraine
Canada
Poland
Australia
US
Russia
Korea
Argentina
Thailand
China
Brazil
Turkey
Mexico
Peru
Venezuela
Colombia
Egypt
South Africa
Iran
India
Myanmar
Malaysia

Source: UN, Haver Analytics, Barclays Research

Advanced economies are in the demographic vanguard


Largely reflecting their more advanced stage of development, with timing also
influenced to some extent by the baby boom that followed the economic and social
disruption of the Second World War, the advanced economies of Japan, continental
Europe, and, less markedly, the US and UK, are at the forefront of the global
demographic transition. Japan and Germany are the oldest societies in the world, with
much of continental Europe not far behind (Figure 6).
Japan and Germany have been the forerunners of lower population growth; in both
countries, the working age population has been falling for roughly 20 years (Figure 7).
This gives them considerable interest as precedents for other countries facing the same
prospect. And such precedents are becoming increasingly relevant. In the past decade,
Germany and Japan were nearly alone in population decline, joined by only a few
countries, including Greece, and a few members of the former Soviet bloc, where
population growth has been undercut not only by a fall in birth rates, but by a period of
stagnation, and even decline, in life expectancy dating back to the mid-1970s. In the
coming decade, however, falling populations are set to become much more common.
Eastern Europe looks likely to overtake Germany and Japan as the region with the
fastest-shrinking working age population (Figure 8).

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FIGURE 7
Working age population falling in Japan, Germany
and China

FIGURE 8
Working age population to keep rising in much of Asia,
Africa, and Latin America
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
Africa

0.2
0.1

Japan

Germany

China

US

Note: normalized to equal 1.0 in the year of peak population. Source: UN,
Haver Analytics, Barclays Research

2035

2030

2025

2020

2015

2010

2005

2000

1995

1990

1985

1980

1975

1970

1965

1960

1955

1950

0.0

Japan

0.3

Germany

0.4

E. Europe

0.5

EA ex GR

0.6

Change in growth rate (pp)

US

0.7

2013-2023 % change

China

0.8

2003-2013 % change

LatAm

0.9

Asia ex JP and CH

1.0

Source: UN, Haver Analytics, Barclays Research

The shrinkage of the working-age population is set to be less rapid in Western Europe,
though it will be quite generalized, with France and the UK alone among the major
European economies not expected to post a decline in the coming decade (the forecast
decline for Spain is quite modest).
The decline in Chinas workforce has begun, and although it is expected to be
considerably more gradual than it was in Germany and Japan, it will likely have a greater
impact given Chinas key role in the global economic and financial system. Korea is also
facing a very abrupt transition. Its working age population is expected to peak within
the next 2-3 years, then decline on a trajectory not dissimilar to Germanys. Korea and
Thailand also stand out for the speed at which their populations are aging (Figure 6).

China
China merits special attention in this area because of its systemic importance and the
special character of its demographic development. Because of the one-child policy,
Chinas birth rate fell far in advance of its development trajectory (Figure 1). Thus, its
population is aging more rapidly and shrinking at a far earlier stage of economic
development than elsewhere. Below, we highlight the characteristics of the Chinese
demographic transition stemming from this atypical history.
First, although the working age population is falling at a much earlier point in Chinas
economic development than occurred in Germany or Japan, the rate of shrinkage is set to
be much smaller than it has been in those countries (Figure 7). That said, the deceleration
of population growth from a rather rapid rate in the past 10 years to a modest rate of
decline in the coming decade looks quite abrupt (Figure 8) and comparable to the
deceleration in Japan in the early 1990s. To the extent that economic consequences result
from the deceleration of population growth, as we shall suggest that they do, China faces
a substantial demographic shock, despite the modest rate of decline in the population.
Second, although China is aging rapidly, it started out with a relatively young
population. So even after 20 years of this atypically rapid rate of aging, the Chinese
population will not stand out as abnormally aged by global standards (Figure 6). In fact,
although the Chinese dependency ratio is forecast to rise substantially in the decades to
come, it is expected to remain quite low by international standards (Figure 5).
Finally, it should be noted the difference between the Chinese experience and that of
Germany and Japan lies not only in the level of development at which their populations
began to decline, but also in the fact that Chinas development has followed a
qualitatively different path. These differences are likely to affect the manner in which
the demographic transition influences the Chinese economy. For example, the
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conventional model of retirement presumes that the generation leaving the workforce
has saved for retirement during the working years, owns much of the national wealth,
and spends it over the course of the retirement years. But given the speed of the
(largely state-directed) development during the past two decades, this model may not
fit present Chinese realities as well as it might an economy with a more extended period
of less frenetic development (eg, the benefits of the rapid Chinese modernization may
be accruing to younger workers who may not retire for many years).

How flat is the earth?


There is a common demographic dynamic that seems to be playing out on a multigenerational time scale globally. But on a timeframe more relevant to market
participants, the diversity is as important as the common trend. The most important
divergence is between lower-income emerging market economies that comprise most
of the worlds population and the economically more advanced economies, including
China, where a disproportionate share of the worlds economic activity is located.
In most of the economically less-advanced regions of the world, the drivers of the
demographic transition are playing out according to the script; life expectancy is
increasing and birth rates are falling. But in Africa, Latin America, India and much of the
rest of Asia, the transition is in an early stage. Populations are getting older and the elderly
more numerous, as they have been doing for decades, but dependency ratios should
continue to fall for at least a decade (Figure 5). And although population growth is
slowing, both total and working-age population will continue to rise for decades to come
(Figure 3). There is no sense in which these societies have reached a demographic
inflection point. And because they have such large populations, they are likely to keep the
world population rising in the coming decades (Figure 3).
The outlook for the economically (and demographically) more advanced regions of the
world is quite different, and there are at least two important ways in which this part of
the world faces a demographic inflection point akin to the one that Japan and Germany
reached in the 1990s. First, growth of the total and working-age populations is projected
to decelerate sharply (US, France, UK) or turn negative (China, Japan, Korea, and much of
continental Europe). For this group of economies as a whole, population growth has
turned negative (Figure 3). Second, dependency ratios are now rising, after decades of
stability (US, euro area) or declines (China, Eastern Europe) in the ratio (Figure 5).
The vast majority of the worlds economic and financial activity takes place in the
advanced economies, where demographic challenges loom fairly large. This is likely to
remain the case for the next decade. The question arises whether the more favourable
demographic context in less advanced economies can provide a meaningful offset to, in
particular, the shrinkage of the labor force that is in store for the more advanced
FIGURE 9
Population growth will be even more concentrated away from existing economic powers
Contribution to world population growth

% total
60

1980-2012

50

2013-2050

40
30
20
10
0
-10
Asia ex JP
and CH

Africa

China

LatAm

US

Euro area

Japan

Source: UN, Haver Analytics, Barclays Research

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economies. It is not a far-fetched scenario; below, we suggest that the emergence of
China as a global manufacturing powerhouse created just such a shock for the global
labor force in the past two decades. At present, though, an event comparable to the
Chinese development surge of the past 20 years seems unlikely. And to the extent that
demographic influences are global rather than national, we think the relevant context is
the more constrained demographic outlook facing the economically more advanced parts
of the world. That said, we think investors should be alive to the opportunities that global
population dynamics present for younger and more rapidly growing populations, and the
associated possibility that a more rapid than expected integration of labor forces in India,
Africa, or elsewhere into the global workforce could temper some of the challenges posed
by demographic transitions in the more advanced economies.

Its complicated
Demographic change is multi-dimensional, encompassing the size as well as the age
distribution of the population. Different elements of the demographic transformation
are likely to interact differently with economies and financial markets. The age structure
will affect savings behaviour, but it will also affect investment demand, and it may do so
not only by changing the age distribution but also the rate of growth of the population.
Population trends affect not only aggregate demand, but also supply, when there is a
substantial impact on the potential labor force. Asset allocation may also be affected by
demographic developments. International spillovers are likely to be significant when the
affected economy is systemically important.
These complexities make us reluctant to summarize the demographic state of the world
into a number or two, or to extrapolate from previous correlations the future impact on
economies and financial markets. Instead, we highlight ways in which key demographic
developments are likely to drive important economic and financial outlook in the
decade (or so) to come. In some cases, population trends take center stage, and in
others they play a supporting role. But in each of the cases that we consider, bar one,
population trends will be a key driver of the outcome.

Population change will stress fiscal structures


Population aging constitutes a source of vulnerability for fiscal sustainability in many
advanced economies, but also in emerging markets, in the longer run. On top of the
expected decline in tax revenues, as result of a shrinkage in the working age
populations, growth rates are expected to decline, driving down the interest rategrowth rate differential, which is an important indicator of a countrys ability to keep its
debt levels sustainable (particularly in EM, according to the IMF 1), over the next two
decades. But perhaps a less-discussed effect of older populations, which is far from
negligible, is the rise in public spending on healthcare and pensions, in addition to other
possible age-related spending (such as residential care in some countries) and the
direct impact of these on government balances. In the advanced economies, public
health spending has risen by about 4pp of GDP since 1970, about half the overall
increase in non-interest public spending. According to IMF projections, total agerelated spending is expected to grow by more than 4% of GDP in advanced economies
and 3.2% of GDP in emerging markets by 2030, after accounting for the large fiscal
consolidations already at work and those in the pipeline. For advanced economies, this
number is almost equal the required fiscal adjustment that countries will have to
undertake by 2030 to stabilize their debts. For emerging markets, it is three times the
adjustment they would have to make without the aging factor.
In the past 3-5 years, public expenditure on health, which is the largest portion of agerelated spending in advanced economies, actually slowed significantly (in all advanced
economies except Japan and Israel). This is not surprising; advanced economies
experienced a sharp deterioration in macroeconomic conditions after 2008/9, which
1

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IMF Fiscal Monitor, October 2013

43

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can explain a lot of this slowdown, in addition to large fiscal consolidations that
naturally included cutting public health expenses. Indeed, according to the IMF analysis,
those countries that suffered the largest drop in output and undertaken large fiscal
consolidation, namely the euro periphery countries, have also experienced the largest
declines in health spending. Another interesting turning point of the past couple of
years consisted of large-scale reforms aimed at cutting spending. Yet these spendingreduction reforms will most likely have no impact on long-term spending growth.
The recent years slowdown may still have a persistent effect, as continued fiscal
pressure and still-weak macroeconomic conditions will leave their mark. As Figure 10
shows, by 2030, the euro area countries are expected to show the lowest increase in
public spending on health. However, as is evident in the chart, when stripping out the
overall projected increase in health spending from the portion unaffected by aging (ie,
the growth in public health spending in excess of GDP growth, after controlling for
aging), the expected increase in spending in these countries is much more similar to
other advanced economies. In other words, the impact of demographics is hardly
mitigated by cyclical factors such as temporary slowdown in macroeconomic
conditions, fiscal consolidations and so on.
The differences among countries in the size and type of the expected increase in agerelated spending are large (Figure 11). The US, where the demographic prospects are
considerably less pressing than those in, for example, Japan and the euro area, is
nevertheless expected to face a huge increase in age-related costs by 2030, mostly
because of a large projected increase in healthcare spending (accelerated by the
national healthcare reforms). The increase of 4.8% of GDP in age-related spending,
which is in line with the most recent (2013) projections of the US congressional budget
office (under the assumption that subnational spending grows at a similar rate as
federal health spending), will more than double the overall adjustment the US needs to
undertake by 2030. China is another example of a country where, despite less imminent
demographic problems, the age-related spending increase is expected to far exceed
those countries with much older populations, like Japan and Germany. This is mainly
because of the large costs of transitioning its pension system from focusing on formalsector workers to a more universal coverage. The dramatic reform that was introduced
in 2009 brought millions of additional people under the public system coverage, and
that number will continue to increase, alongside the increase in the ratio of pensionaged people to the total population.
The two most striking cases of expected increase in age-related spending are Korea and
Turkey. Were it not for the large adverse effect of aging, both would have had enough
fiscal space to expand their budgets over the next two decades. Turkey is surprising: with
a still-young population (median age is 29, the second youngest in the OECD), the
government is already spending on public pensions the same proportion of GDP as the
US, and more than the UK, Denmark and Netherlands , despite all these countries having
2-3 times as many people over 65 relative to their populations as Turkey does 2. In Korea,
this is mostly driven by an expected surge in public expenditure on pensions, the result of
a rapidly developing country where a public pension system was introduced only in 1988,
and the ratio of pension-aged population (65+) is expected to rise faster than in any other
country (an increase of 11.2pp in 2013-30, compared with 6.2 in the US, 5.6 in Japan, 7.3
in China, 7.6 in the Netherlands, 7.1 in Germany and lower levels in the rest of the
eurozone). In 2009, the expenditure of the Korean government on pensions was the
lowest in the OECD (after Iceland) and it is projected to catch up fast. In France and Italy,
where the rise in the ratio of elderly to total population is expected to be fairly moderate
(5.4 and 5.6pp), should face very muted rises in age-related spending in the same period.

13 February 2014

OECD Pensions At A Glance, 2013.

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FIGURE 10
Projected increase in public health spending in advanced
economies, 2013-30
5

pp of GDP

Excess cost growth*


Aging
Unweighted average (= 1.6)
Weighted average (= 2.8)

FIGURE 11
Total required fiscal adjustment and age-related spending,
2013-30
% GDP

Required adjustment between 2013-20*

16

Pension spending change, 201330

12

Health care spending change, 201330

USA
CHE
NLD
NZL
KOR
BEL
NOR
CAN
AUS
JPN
GBR
AUT
DNK
FIN
ISL
ESP
DEU
SVK
PRT
SVN
GRC
FRA
LUX
ITA
CZE
IRL
EST
ISR
SWE

* Excess cost growth is the growth of public health spending in excess of GDP
growth, after aging is controlled for. Source: IMF Fiscal Monitor, October 2013

Japan
US
Belgium
Ireland
Spain
UK
India
NZ
Canada
Nether.
Malaysia
Portugal
Turkey
Australia
Thailand
Austria
Korea
France
China
Mexico
S. Africa
Switzer.
Finland
Russia
Greece
Argentina
Poland
Italy
Indonesia
Brazil
Germany
Czech R.
Sweden
Colombia
Denmark

-4

* The cyclically adjusted primary balance needed to bring down the debt ratio
to 60% GDP (in AE) and 40% GDP (in EM) in 2030, or stabilize the debt at
end-2013 if it is less than 60%/40%, less the CAPB in end-2013. Source: IMF
Fiscal Monitor, October 2013, Barclays Research

Demographics and rebalancing in China


The rebalancing imperative for China is in the most important respects unrelated to its
population dynamics. Chinas development trajectory would be unsteady, unbalanced,
and unsustainable even if it were not facing a demographic inflection point. But
demographic pressures will play a significant role in the rebalancing process. In key
respects, the demographic transition supports the rebalancing strategy. But in other ways,
demographic developments in the pipeline increase risks around the rebalancing agenda.
Population dynamics are a key part of Chinas much-discussed Lewis moment 3. The
sharp slowdown in growth of the working-age population has interacted with 20 years of
rapid growth in labor demand to exhaust much of the surplus labor available to be shifted
from low-productivity rural employment to higher productivity, mainly urban
occupations. The continuing decline in the working age population should help maintain
tight labor markets and keep upward pressure on real wages. To the extent that the
rebalancing agenda requires an increase in household income to support the
consumption spending that is needed to replace investment as a driver of domestic
demand, this aspect of the demographic transition provides a strong economic tailwind.
The aging of the population should also support the rebalancing from investment to
consumption. Cross-country evidence (see, for example, IMF World Economic Outlook,
September 2004) suggests that countries with higher proportions of elderly tend to have
lower savings rates. (They also tend to have lower investment rates, but the impact on
saving was found to be larger.) We are not sure that the cross-country evidence
adequately captures the special characteristics of the Chinese case, but the idea that
aging of the population supports a lower saving rate is at least qualitatively plausible.
But Chinas population dynamics also pose a risk to the rebalancing agenda. It stands to
reason that demography affects investment demand not only through its impact on the
age distribution, but also via the rate of increase of the population. One source of demand
for investment is to maintain the per-worker capital stock, and to accommodate trend
3

A Lewis moment, named after Nobel Prize-winning economist Arthur Lewis, refers to the period in a countrys
development when labor demand associated with industrialization has absorbed all the surplus labor previously
engaged in lower-productivity occupations in the countryside. Before the Lewis moment, industrial firms can hire
workers at a wage determined by the low-productivity occupations in rural areas. After the Lewis moment,
wages tend to rise with productivity in the modern sector.

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growth in demand for output. If population growth slows, this source of demand for
investment declines as well. To see how big this could be, note that along a steady-state
growth trajectory, net investment has to be sufficient to maintain a steady ratio of capital
to labor. The investment rate required to achieve this is equal to the rate of population
growth times the capital-output ratio. In the US and Japan, the replacement cost of the
capital stock is roughly 2 times GDP. So a 1% deceleration in the rate of growth of the
population implies a (permanent) decline in required investment of about 2pp of GDP.
(We are unaware of any estimates of the Chinese capital stock, but in light of the
investment-intensity of Chinese growth the capital-GDP ratio is likely higher, and the
demographic multiplier at least as high, as in Japan.)
While Japan and China are very different in many ways, the parallel with the initial stage
of the Japanese lost decade seems apposite to us. The bubble economy of the 1980s
promoted an investment boom of 3-5% of GDP that needed to be worked off in the
post-bubble era (Figure 12). Finding substitutes for the lost demand was the Japanese
rebalancing challenge, and it proved difficult to accomplish (not least because the
adverse shocks kept coming; see Chapter 1, Japan-style deflation in Europe getting
harder to dismiss).
In our view, the Japanese rebalancing problem of the 1990s was compounded by a
steady decline in underlying investment demand that resulted from the increasingly rapid
rate of shrinkage of the working age population. How big might this have been? The
working age population is now shrinking at the rate of about 0.9% per year, compared
with growth of about 0.5% of GDP before the mid-1990s. The 1.5pp swing in population
growth could therefore (in line with the arithmetic described above) generate a 3pp
decline in the equilibrium Japanese investment ratio. This is not small by comparison
with the magnitude of the cyclical over-investment that needed to be accommodated in
the early 1990s, and it helps explain why Japanese investment has stabilized well below its
pre-boom level, even as the economy has regained its cyclical poise.
The downside risk for the Chinese rebalancing seems clear. The slowdown in
population growth is less intense than it was in Japan, and the Chinese authorities have
policy levers that Japanese authorities did not have. But the investment boom that
needs to be worked off is probably substantially larger than the one that confronted
Japan in the early 1990s. The demographic risk to investment is not the main policy
problem facing Chinese authorities, and it certainly does not put a reasonably smooth
transition out of the countrys reach. But it raises the stakes in achievement of the
structural transformations required to secure a more balanced growth trajectory.

FIGURE 12
Japanese investment stabilized below pre-boom level

FIGURE 13
despite recovery of the economy

35%

30%

25%

20%
3

15%

10%
5%

0%
1980 - 1985 - 1990 - 1995 - 2000 - 2005 - 2010 Q1
Q1
Q1
Q1
Q1
Q1
Q1

0
1980 - 1984 - 1989 - 1994 - 1999 - 2004 - 2009 - 2013 Jan
Nov
Sep
Jul
May
Mar
Jan
Nov

Japan fixed investment/GDP


Source: Haver Analytics, Barclays Research

13 February 2014

Japan unemployment rate


Source: Haver Analytics, Barclays Research

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Demographics compound euro area fiscal stress


Demographic trends will affect national budgets in several ways. One of the most
important of these is the anticipated rise in age-related spending, discussed above. A
reassuring finding of that discussion is that the fiscally stressed economies of the
eurozone are not the most heavily affected. In general, the economies at most risk
happen to be those where, rightly or wrongly, market participants view fiscal challenges
as manageable, such as the US, New Zealand, and Korea.
But population dynamics may also affect the sustainability of public debt if the anticipated
deceleration in the potential labor force results in slower growth of national income and, by
extension, the tax base. All else equal, including the interest rate at which the debt is
serviced, a slowdown in trend growth requires an increase in the primary fiscal surplus equal
to the change in the rate of growth multiplied by the magnitude of the public debt.
Figure 14 highlights the deceleration of growth in the working age population forecast
for a number of eurozone economies. As we highlighted above, most euro area
economies are expected to experience declines in the working age population. The rate
of decline will be comparable to the one that Germany has experienced in the past 15
years, but the German population will continue to decline most rapidly.
In Figure 15 we illustrate the impact on the required fiscal effort, on the implied
assumptions that the interest rate and productivity growth are unaffected by the
deceleration of growth in the potential workforce. We compute the effect using the
recent historical ratio of debt to GDP; in those countries, like Spain, where debt is
expected to continue rising for the next few years, these estimates are conservative.
The impact is largest in Spain, because it suffers the largest deceleration in the rate of
population growth. The impact amounts to about 1pp of GDP; modest by comparison
with the very large fiscal consolidation that has been required of Spain, but far from
trivial. The demographic transition in Portugal, Italy and Belgium also require a
meaningful fiscal effort, in excess of 0.6% of GDP.
Each of these countries faces other challenges and opportunities to maintain or restore
fiscal sustainability, which will also be influenced by a restoration of full employment,
an improvement in trend productivity growth, and by institutional adaptations that
improve confidence and lower interest rates. Demographic factors may be secondary
compared with the fiscal imbalances that accumulated during the credit boom of the
early 2000s, and the stresses that have been generated by the ensuing economic
downdraft. But they are large enough to deserve careful consideration by investors in
the affected economies.
FIGURE 14
A sharp deceleration in euro area population growth
%
1.5

100

0.5

80

0.0

60

-0.5

40

-1.0

20

-1.5
GRE

FRA

DEU

PRT

ITA

Source: UN, Haver Analytics, Barclays Research

13 February 2014

AUT

NED

BEL

Impact of the change in population


growth on the required fiscal stance

bp
120

Growth of working age population 1998-2013


Growth of working age population 2013-2028
delta (pp)

1.0

FIGURE 15
adds to the required fiscal adjustment

ESP

0
GRE

FRA

DEU

PRT

ITA

AUT

NED

BEL

ESP

Source: Haver Analytics, Barclays Research

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The end of the global labor glut and the return to capital
Few events have been as consequential for world financial markets as the two-decade
boom in US corporate earnings that began in the early 1990s. This was largely
unexpected in the early 1990s, when the profitability tide turned, and it has been the
object of surprisingly little economic investigation. The rise in corporate profits as a
share of GDP (Figure 16) has quite likely been aided by the participation of US
businesses in faster-growing economies outside the US. But this did not make the past
20 years one of win-win for capital and labor. The rise in corporate profitability is
clearly associated with an unprecedented degree of pressure on the return to labor
(which we measure in Figure 16 with the ratio of unit labor costs divided by the price of
output in the non-farm business sector).
There are a number of explanations for the pressure on US labor markets that has been
so closely associated with the strong performance of capital income. Here, we focus on
developments in the world labor market.
Labor markets are largely regional, but in a world knitted together by international
trade, regional or national labor markets are also indirectly but strongly linked, and
labor market conditions depend not only on local but also on global developments.
Figure 17 illustrates developments of the past decade and the outlook for the global
labor supply (more specifically, the working-age population in the six largest
manufacturing powers, the US, China, Japan, the eurozone, the UK and Korea). The
chart highlights the abrupt deceleration and imminent decline in the working age
population that we have already discussed.
In our view, this chart underestimates the magnitude of the labor market shock during
1990-2010 because that was when the Chinese labor force transitioned from almost
complete isolation from the world economy to become an integral part of the global
manufacturing workforce. To illustrate what this meant for the global labor force, we
made an adjustment to the Chinese data, multiplying it by 0.5 in the years before 1985
(to reflect Chinas weak integration in the world economy), and by 1.0 in 2005 and after
(reflecting Chinas full integration by then), with the interim weight rising along with the
exposure of the Chinese economy to international trade.

FIGURE 16
A 20-year boom is US corporate profits coincided with
downward pressure on labor compensation
% GDP

FIGURE 17
Strong growth in the labor supply of major manufacturing
economies is now going into reverse

2009 = 1.00

bn persons

0.14

1.20

0.12

1.15

0.10

1.10

0.08

1.05

0.06

1.00

0.6

0.04

0.95

0.4

0.02

0.90

0.00
1947 Q1

0.85
1960 Q1

1973 Q1

1986 Q1

US corp profits/GDP
Source: Haver Analytics, Barclays Research

13 February 2014

1999 Q1

2012 Q1

ULC/price of output (rhs)

1.2
1.0
0.8

0.2
0.0
1950 1960 1970 1980 1990 2000 2010 2020 2030
Unadjusted

Adjusted

Note: We include the US, Japan, euro area, UK, China and Korea in the data.
The unadjusted data is the sum of the working-age population in these
economies. The adjustment is described in the text. Source: UN, Haver
Analytics, Barclays Research.

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The coming decades could be
much friendlier for labor, and
hostile for returns to capital

This is an ad hoc and purely illustrative approach, but we think it captures an important
element of the Chinese development miracle of the past two decades. It suggests that
the pressure on labor markets in advanced economies was due, at least in part, to rapid
growth in the effective supply of labor in key manufacturing regions. More to the point,
it highlights that this influence is now reversing course, as the labor force shrinks in
China and many advanced economies. The coming decades could as a result be much
friendlier for labor, and hostile for returns to capital, than the past two have been. The
adverse cyclical overhang from the 2008 financial collapse, the 2010 eurozone
confidence crisis, and the ongoing rebalancing of the Chinese economy continue to
keep labor markets weak. But as these influences fade, we think investors should look
to the secular trend in returns to capital with some caution.

Demographics and deflation or not?


A lesson that many market participants seem to have learned from the Japanese
experience is that an abrupt demographic transition is bad for the economy, creating
strong deflationary tendencies. We do believe that the sharp transition in population
dynamics in Japan, and in particular the shrinkage of its working age population since
1995, was one of the shocks that undermined economic performance in the 1990s,
and helped set the stage for the decade and a half of deflation from which Japan seems
only now to be emerging (see Chapter 1).
In this context, the question arises whether the coming demographic inflection point
that now faces most of the advanced economies will be similarly deflationary. We are
sceptical, and think that demographics will be only one of several drivers of the
inflationary (or deflationary, as the case may be) context in advanced economies, and
likely not the decisive one.
Circumstantial evidence of a link between deflation and demographics is not hard to
find. In Japan, the evolution of deflation is strikingly correlated with demographic trends
(Figure 18). In a 2012 speech, BOJ governor Shirakawa suggested that there seems to
be positive correlation between population growth and inflation in advanced
economies. (We reproduce these findings in Figure 19.)
We think there is less to this evidence than meets the eye. A close examination of the
Japanese experience suggests that the demographic shock was only one of a series of
shocks and policy choices leading to deflation. The cross-country correlation between
population growth and inflation in the OECD is largely driven by two outliers, Japan (the
country with negative inflation in Figure 19) and Turkey (the country with 8% inflation
FIGURE 18
Japans deflation was likely associated with negative
demographics, among other factors

FIGURE 19
and cross-country comparison points to an apparent
correlation between population growth and inflation
10

Annual average % change, 2003-2013

Japan CPI ex food&energy, % y/y

GDP deflator

4
3
2
1
0

R = 0.3207

Japan labor force, % 8q/8q

6
4
2
0

-1

-2
-1.0

-2
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Source: Haver Analytics, Barclays Research

13 February 2014

-0.5

0.0
0.5
1.0
1.5
Working age population growth

2.0

2.5

* Sample includes 29 OECD countries. Source: OECD, UN Population


Statistics, Barclays Research

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in Figure 19), and does not survive the incorporation of non-OECD countries, such as
Russia, where demographics have been weak and inflation high by international
standards. The association between demographics and deflation is also quite weak in
the other demographic trailblazer, Germany (Figure 20). Like Germany and Japan,
Ukraine experienced persistent declines in population during the past decade, and this
has been combined with both very high and (more recently) low inflation (Figure 21).
At a theoretical level it is possible to identify deflationary consequences of demographic
advance. As discussed in the context of China, slower growth in the potential workforce
may lead to a reduction in investment demand. Politics may also play a role, eg, if older
societies become more inflation-averse because the median voter is more reliant on
fixed income. We suspect that this was an important, though not the only, driver of
weak economic performance and therefore deflation in Japan during the 1990s.
But contradictory influences are equally easy to find. Aging (or, more generally, a rise in
the dependency ratio) may be associated with lower investment, but it is also associated
with lower savings. The net effect of the shift in savings and investment on domestic
demand is uncertain, in principle, and on some estimates, the saving effect is larger (see
IMF World Economic Outlook, September 2004). Inflation depends on supply as well as
demand, and a sharp reduction in the labor force comprises an adverse supply shock that
may put upward pressure on labor costs and price inflation. This is likely to remain an
important factor in the development of the Chinese economy, as we have argued. In
addition, the rise in the ratio of dependent population to the working population may
create fiscal stress; to the extent that fiscal theories of price level apply, this fiscal stress
could be associated with an eventual intensification of inflationary tendencies.
Above all, demographic factors generally play out over a timeframe over which
monetary policy even with its long and variable lags can make its influence felt.
These shifts in population are only one of the disturbances that monetary authorities
are forced to confront, and their effect on the inflationary context is uncertain and quite
likely conditional on economic structure and specifics of the demographic transition.
The Japanese experience offers an interesting precedent, but it seems to us that the
association between demographic advance and deflation is a lesson that some
observers may have learned too well. We would look elsewhere for dominant drivers of
the inflationary context in the decade to come.

FIGURE 20
Germany experienced no deflation, despite weak
demographics

FIGURE 21
In Ukraine, persistently weak demographics have been
combined with both high and low inflation

Germany HICP exc. Unprocessed food& energy


(% y/y, LHS)
German working age population (% y/y, RHS)

0.7

35

2.0

0.5

30

1.5

0.3

1.0

0.1

0.5

-0.1

0.0

-0.3

-0.5

-0.5

-0.7

-5

2.5

-1.0
95

97

99

01

03

05

07

09

11

13

Source: Haver Analytics, UN Population Statistics, Barclays Research

13 February 2014

Inflation (% y/y CPI, LHS)


National savings (% GDP, LHS)
Working age population (Thous. RHS)

33.5
33.0

25
20

32.5

15
32.0

10

31.5
31.0
03

04

05

06

07

08

09

10

11

12

13

Source: Haver Analytics, UN Population Statistics, Barclays Research

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CHAPTER 4

The cost of evolving bank regulation


Jeffrey Meli
+1 212 412 2127
jeff.meli@barclays.com
Brian Monteleone
+1 212 412 5184
brian.monteleone@barclays.com
Conor Pigott
+1 212 412 3441
conor.pigott@barclays.com

Since the financial crisis, academics, politicians, and regulators have proposed
reforms aimed at making the banking sector more stable. Often, these rules have
sought to boost industry safety by mandating capital structure changes. While
acknowledging the benefits to industry stability, many in the business world
have argued that these reforms are costly, as they raise the average cost of
funding and thereby damage credit creation and liquidity provision. Regulators
and some academics have responded that, through the lens of Miller-Modigliani
(MM), these concerns are unjustified and that banks should be indifferent to
changes in capital structure.

Our analysis suggests a middle ground: some reforms are costly. We believe that
raising capital requirements whether through minimum equity or minimum
wholesale debt as a percentage of the balance sheet would constrict the ability
of most large banks to interact with clients in their respective business lines,
impairing revenue. Banks would miss out on profitable lending opportunities
and related service revenue, while businesses and consumers would face
incrementally impaired access to credit at an incrementally higher price. On the
other hand, we do not see reform as costly where regulations aim merely to shift
the mix between sources of wholesale funding, such as equity and debt.

We conclude that capital structure changes are likely to be more costly in the US,
where wholesale funding represents a relatively small share of bank funding.
Proposals such as the minimum debt requirement may effectively cap customercentric liabilities below natural levels and introduce related costs. Alternatively,
the new capital requirements may be less costly in Europe, where banks have
typically funded themselves with a higher percentage of wholesale funding by
choice. In this region, banks may be able to limit the costs of higher equity
requirements by shifting debt balances lower and leaving customer-centric
liabilities unchanged.
Our review of the validity of applying MM to banks to assess the costs of capital reform
leads us to identify a key link between deposits and revenue. Specific liabilities, such as
deposits and certain broker liability balances, generate positive externalities via related
fee income or better loan performance. Forcing a reduction in these special liabilities
would restrict the profitability of the underlying asset base, creating a cost that would
be passed on to various stakeholders.
Therefore, our assertion is not that increased capital requirements are bad, but rather
that new capital requirements which limit customer-centric liabilities are costly, and
that rules must balance these costs against the benefits of financial stability. Costs and
benefits must be viewed in context.
Furthermore, we identify additional negative side-effects that could result from the
quick succession of changes to capital structure regulation. Most notably, an increase
in required wholesale funding might not only limit positive externalities in fee income; it
could also encourage banks to subtly add industry risk in ways that regulators have
historically found difficult to protect against.

The capital debate continues to develop


Bank capital has been a focus for politicians, regulators, bankers, and investors since
the housing bubble burst in 2007. This debate continues today, despite equity ratios
that are significantly higher than they were pre-crisis across most large international
banks. In fact, it has broadened into a discussion about the entire capital structure.
Some of the initial Basel III elements are currently beginning to be phased in
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encouraging higher common equity capitalization globally, preferred issuance in the US,
and CoCo issuance in Europe while other elements face continued debate, and new
proposals continue to surface. For example, in the US, regulators have said they plan to
increase minimum bank capital ratios further via a leverage ratio, establish a required
minimum amount of long-term wholesale financing for the largest banks, and review
ways to limit short-term, secured wholesale financing activity. Likewise, outside the US,
regulators continue to pursue super-equivalent Basel III requirements and intra-group
ring-fencing strategies to limit systemic risk.
FIGURE 1
Some recent regulatory proposals have sought to adjust bank capital structures
Item

Status

Description

Basel III Tier 1 Common


Capital Minimums

Rules Finalized, Subset of Basel III. Largely implemented via CRD IV in


In Phase-in Europe and Federal Reserve rulemaking in the US.
Raises capital requirements to 7.0-9.5% common
Process
equity as a percentage of risk-weighted assets. Also
makes numerous adjustments to risk-weighted asset
calculation

New Tier 1 Capital


Definitions

Rules Finalized, Subset of Basel III. Trust preferreds no longer eligible for
In Phase-in Tier 1 capital credit, leading to issuance of noncumulative perpetual DRD preferreds in the US and
Process
CoCo issuance in Europe and elsewhere

Quantitative Liquidity
Regulations

Proposed

Rules

Supplementary Leverage
Ratio

Rules
Proposed

Subset of Basel III. Requires liabilities prone to outflows


to be matched with high quality liquid assets over
shorter-term (Liquidity Coverage Ratio, LCR) and
longer-term windows (Net Stable Funding Ratio, NSFR)
Subset of Basel III. Requires a much higher, standard
percentage of on-balance-sheet assets and off-balancesheet exposures to be funded with equity (regardless of
the riskiness of the asset/exposure)

Minimum Debt
Requirement

Would require minimum bank holding company-level


Under
Consideration debt plus equity as a percentage of risk-weighted assets
to facilitate a potential orderly liquidation of a
(in US)
systemically important financial institution.

Short-term Financing
Reform

Under
Would effectively minimize ability to use short-term,
Consideration wholesale funding to achieve leverage via regulations to
require higher capital charges for heavy users or
(in US)
minimum collateral haircuts

Source: Barclays Research

The basic arguments to date for and against higher equity


Underpinning the discussion of all the proposals for bank capital structures is a debate
on the broad macro-economic consequences or lack thereof of making banks safer.
Bankers typically argue that reducing bank leverage is bad for the economy ie, banks
will reduce the supply of credit and increase the cost of borrowing if forced to raise
expensive equity. The basic argument is that for most large banks, the cost of equity
is 10-15%, many times the cost of raising debt in the wholesale market. Therefore,
raising additional equity must result in a higher average cost of funds, which will feed
through to the rates banks charge on loans.
This argument is dismissed by many regulators and academics. Their counterargument
relies on the Miller-Modigliani (MM) theorem, a cornerstone of corporate finance. To
paraphrase, MM states that in the absence of taxes and bankruptcy costs, the choice of
capital structure is irrelevant. The basic argument is that the costs of equity and debt
adjust to reflect their respective levels of risk. So a firm with more debt will provide more
upside to equity, but at the cost of higher debt spreads. Ultimately, the assets of a firm
define its riskiness, and the distribution of that risk across liabilities does not affect the
enterprise value of the firm. Of course, in the real world, interest is tax deductible, giving
corporations an incentive to increase leverage. This is countered by the value destruction
associated with bankruptcy (the cost of financial distress). Actual firms seek to balance
these two issues when choosing a capital structure.
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Seems theoreticalbut it is the framework used by regulators


Applying a theoretical result to the very real problem of bank regulation may be brushed
off by market participants, but this line of reasoning has two things going for it. First, it is
compelling. The insights in MM explain a lot about the capital structure decisions of nonfinancial firms, and many of the implications seem to hold for banks. For example, banks
with less equity tend to have wider credit spreads. The equity of less-leveraged banks is
less volatile, and less costly, than that of more-leveraged banks. 1 In other words, the
prices of bank securities seem to adjust as one might expect, given MM.
Second, proponents of MM among regulators and policymakers argue that forcing
banks to change their capital structures would have few implications for the economy.
MM is the intellectual framework supporting this view and has been cited, explicitly and
implicitly, by senior officials at the Federal Reserve and the Bank of England. 2 It also
underpins a rising number of editorials and op-eds demanding a safer banking system
and supporting such proposals as raising equity ratios to 20-30% or markedly
increasing wholesale debt financing. 3
That said, we question the wisdom of applying the principles of MM uniformly across
all types of bank funding.

MM misapplied: Depositors are customers, not just creditors


We think the proponents of dramatic changes to bank capital structures are
misapplying MM to the banking sector and thereby underestimating the implications of
higher capital requirements for credit creation and the broader economy. The
breakdown of MM in the context of banking comes from one of the economic theorys
basic, underlying assumptions namely, that a firms cash flows do not depend on its
financial policy. In other words, MM presupposes that our choice as investors to hold a
companys stocks or bonds does not affect the way we interact with that company as
consumers. This is usually a reasonable assumption. For example, an investor in Ford
equity or debt is no more likely to buy a car from Ford than from any other car
manufacturer. In fact, precisely because this assumption holds for most companies, it
does not typically receive much attention when discussing MM.
However, this assumption does not hold for banks. Most banks capital structures
comprise investors who look much more like customers. For example, a banks depositors
are technically liability holders, but depositors feel much more like customers when
entering a branch, and the banks themselves openly regard them as such. This is because
a depositor at a given bank, for instance, JPMorgan, is much more likely to purchase other
financial services from JPMorgan, and much less likely to purchase them from a
competitor, such as Bank of America. Yes, the bank-depositor relationship generates
liabilities, but the ability to accept these specific types of liabilities (in this case, deposits)
directly supports the banks ability to generate higher revenue per unit of assets.
This logic applies also applies to a number of other parts of a banks capital structure,
where liabilities are similarly linked to specific customers, businesses, and revenue
opportunities. For example, broker-dealers connect repo borrowers with repo lenders,
match short-sellers with securities lenders, and fund brokerage customers margin
borrowing with other customers net assets. Banks offer to take on these liabilities as
part of a sales and trading relationship with institutional clients, just as they take on
deposits as part of a consumer finance/wealth management relationship with
1

Kashyap, Rajan, and Stein (2008).


Mervyn King Banking from Bagehot to Basel, and back again (October 25, 2010,
http://www.bis.org/review/r101028a.pdf), Daniel Tarullo Industry Structure and Systemic Risk Regulation
(December 4, 2012, http://www.federalreserve.gov/newsevents/speech/tarullo20121204a.htm).
3
Tarullo (2012), Tim Harford More Equity, Less Risk (July 2, 2011, http://www.ft.com/intl/cms/s/2/5038a3dea1f3-11e0-b485-00144feabdc0.html#axzz2NGQa3FM1), Simon Johnson A Very Strange Way to Assess the
Safety of Banks (September 30, 2012, http://www.bloomberg.com/news/2012-09-30/a-very-strange-way-toassess-the-safety-of-banks.html) ; Jeremy Stein (2010,
http://www.economics.harvard.edu/faculty/stein/files/brookings-2010-greenspan-comment-jcs.pdf).
2

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FIGURE 2
The typical but wrong schematic for a bank

FIGURE 3
The reality customers and depositors are the same

Depositors

Depositors
Funding

Stock &
Bond
Holders

Source: Barclays Research

The
Bank

Credit

Funding
The
Bank

Borrowers

Funding
Financial Services

Stock &
Bond
Holders

Source: Barclays Research

individuals. Each of these activities creates a matching (in a sense, self-funding) set of
assets and liabilities, which may or may not create a positive revenue spread for a bank.
More important, the overall profitability of the asset-side of the business is
augmented by (and often centered on) the ability of banks to leverage their position as
intermediaries and generate fees from related services.
This is noteworthy because, as mentioned above, it differs so markedly from the
traditional division between investors and customers across most corporate sectors. In
the technology industry, for example, Dell does not sell computers primarily to its
bondholders, and, in autos, Ford does not sell cars primarily to its equity holders. But, in
the banking sector, Wells Fargo does primarily sell credit cards, debit cards, mortgage
origination, and other financial services to its depositors.
This exposes something fundamental about the business of banking. The typical
schematic of a bank has depositors and other liability holders on one side and
borrowers on the other (Figure 2). In this framework, a banks main product is credit,
and liabilities of all types are relevant only as a means to fund credit provisions. Yet, in
reality, banks are not just lending institutions, providing credit to arms-length
borrowers. They sell a broad array of financial services, of which access to credit is only
one others include debit and credit cards, trust and fiduciary services, and wire
services. And the people they sell these services to are their depositors. A deposit is the
lead product that brings in a profitable customer relationship in fact, the deposit base
forms a banks primary pool of customers. As noted above, this logic applies to various
broker-dealer liabilities, allowing banks to develop relationships with institutional clients
that will lead to provision of (and payment for) other services. These insights suggest a
different schematic for a bank, in which the list of products is longer and the feedback
loop with depositors is made explicit (Figure 3).

How do deposits drive revenue in practice?


Deposits are the most obvious MM-confounding liability in banking sector capital
structures. Below, we detail how these liabilities relate to revenue in practice.
We identify two channels. The first is the fees earned selling non-credit financial services.
Many of the services that banks sell result in fee income that is unrelated to balance sheet
lending. ATM fees, debit card fees, wire services, currency conversion, and overdraft
protection are just some examples. Other activities look like credit extension but are
actually fee income. For example, a bank may originate a mortgage for a customer and
then sell the loan to a GSE. This can be quite profitable, but does not involve any
meaningful extension of bank credit. Selling non-credit financial services is critical for
banks. In the next section, we analyze bank income statements and estimate that fees
driven by cross-selling to depositors constitute ~35% of post-provision revenue.

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The second channel is what we call relationship lending. Through its provision of
financial services, a bank develops a relationship with a business or individual that
facilitates better lending decisions. For example, a bank can learn about a small
business from offering transaction services or payment processing. The benefits of
relationship lending are harder to demonstrate empirically, but there is evidence that
deposit relationships lead to better access to credit.

1) Deposits are related to a series of material fee streams


Banks have ample opportunity to cross-sell other financial services to their depositors.
This benefit of deposits goes beyond their being slightly cheaper than other forms of debt;
it facilitates a customer relationship through which banks sell financial services. We focus
on these areas. The caveat is that we are surely not capturing all synergies related to
deposits convenience yield, maturity transformation, etc. which we believe form the
essence of the business of banking. Yet the sheer magnitude of the associated revenue
that we can identify and the focus that banks put on cross-selling financial products in
our view demonstrate the centrality of the synergies between deposits and revenue.
A deposit account is an entry-level banking product that leads to opportunities for a
bank to provide fee-generating services. 4 For example, customers who open a
checking account may eventually seek a credit card, mortgage, or investment advice
as they progress through various life stages. Similarly, a companys banking needs
often expand from simple operating accounts to more complex cash management,
lending, and advisory services over the corporate lifecycle. As these needs arise, a
customer is more likely to go to its current bank for the desired products and
services. In other words, by collecting deposits, banks are positioning themselves to
generate fee revenue.
This strategy is reflected in management commentary and statistics disclosed by a
number of large US banks. For example, during a 4Q12 earnings call, Wells Fargo CFO Tim
Sloan described the intimate connection between deposits and fee income as follows:
[T]he way that we think about deposit growth is not just to fund our loan
growth or fund investments; it's broadening the relationships and bringing
new relationships into the company. And so that gives us an opportunity not
only to invest and increase spread income over time, but to be able to broaden
those relationships so that we can grow fee income. 4Q12 Earnings Call
(January 11, 2013)
Similarly, US Bancorp CEO Richard Davis has highlighted fee-related streams as
essential to monetizing the deposit relationship:
We've established a relationship on a package basis where we can add
attributes and/or up-sell into something more reasonable for which they know
they're buying and for which they have value for. 4Q12 Earnings Call
(January 16, 2013)
Outside the US, European banks, such as Santander UK, have highlighted the
importance and profitability of monetizing core deposit customer relationships:
1|2|3 Current Account customers have 3x higher average account balances,
nearly double the number of products, significantly lower attrition and a much
better risk profile than non-1|2|3 customers. 2013 Half Yearly Financial Report
This commentary is backed by the (limited) available bank-by-bank disclosure. In 4Q12,
Wells Fargo highlighted that its retail deposit product leads to the cross-sale of
additional banking products (Figure 4). For example, 33% of retail households open a
credit card and 21% of home-owning households obtain a mortgage from the bank.

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FIGURE 4
Wells Fargo retail deposit households with each additional
product (%)
35%

FIGURE 5
JPMorgan product originations from branches and
business clients (%)
70%

33.1%

60%

30%

50%

25%

65%
50%

50%

40%

21.1%

30%

20%

20%

20%

15%

10%

10%

0%

6.0%

5%

2.4%

0.6%

0%
Credit Card Mortgage*

Personal
Loans

Student
Lending

Direct Auto

Note: *Mortgage penetration as percentage of home-owning households.


Source: Company reports, Barclays Research

Chase
Retail
Paymentech
Mortgages
New Sales
Originated in
from Business
Branches
Banking Clients

Chase Credit
Cards
Originated in
Branches

U.S. Retail
Asset Mgmt
AUM
Originated in
Branches

Source: Company reports, Barclays Research

Likewise, in its February 2013 investor day, JPMorgan noted that cross-sell to
depositors represents a significant share of overall product sales. For example, 50% of
retail mortgage, 50% of Chase-branded cards, and 20% of US retail AUM are originated
in the branches. This cross-sell strategy is also evident in business banking, where 65%
of Chase Paymentech new sales (its merchant payment processing service) are sourced
from branches.
Not only are fee streams linked to the deposit network, they are also a material portion
of US banks overall profitability. Fees take many forms, ranging from those most
directly linked to depositors (account service fees, ATM fees, overdraft protection,
interchange fees, safety deposit boxes, wire transfers, corporate cash management,
currency conversion, etc) to those indirectly linked to depositors (trust and fiduciary
services, insurance products, credit card fees, and mortgage banking), to those
arguably unconnected to depositors (trading revenue, investment banking, merchant
banking, etc).
Together, the types of fee income logically linked (directly and indirectly) to the deposit
base constitute a major portion of a banks post-provision revenue. Based on FDIC data,
roughly half (47%) of US commercial banks total post-provision revenue over the past
decade has consisted of non-interest/fee income (Figure 6). Depending on bank size,
70-80% of this fee income or c.20-40% of total post-provision revenue can be
linked to deposit relationships to some degree.5 Note that this related revenue is
before any benefit from interest expense savings or superior loan performance due to
deposit funding.
Banks generally limit disclosure of the dollar value of cross-selling revenues, but data
from JPMorgan confirm the trends in industry-wide data (Figure 8). Slides from its
recent investor day highlighted $14bn in 2012 cross-selling revenue. We link at least
$9bn of this cross-sell revenue to deposit relationships. Customers for these services
are sourced from the pool of retail or corporate banking clients. Thus, the deposit base
generates the profit opportunity, even though the fees are reported in the treasury
services, mortgage banking, investment banking, investment management, and credit
card business lines.

This is largely supported by the 2004 Federal Reserve Bank of Chicago paper How do banks make money?
The fallacies of fee income, although the authors do not dive as deeply into the unidentified non-interest fees
and attribute substantial value to the forgone interest expense that banks do not have to pay because
depositors are willing to accept below-market yields on deposit balances.

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FIGURE 6
Average annual revenue breakdown, all US commercial banks, 2003-12 (%)
Fiduciary Services
5.7%

Deposit Charges
7.9%
Trading
3.3%

Credit Income
(Net Interest Income
less Provisions)
53%

Non-Interest
Income
47%

Investment Banking
2.4%
Loan Servicing
3.4%

Other Non-Interest Income


18.0%

Securitization
3.0%
Insurance
O.8%

Loan Sales
1.6%

Source: FDIC, Barclays Research

FIGURE 7
Average annual revenue breakdown by asset size, all US commercial banks, 2003-12 (% of post-provision net revenue)
Deposit Related Fees
Assets

# of Banks
in 2011

Credit
Income

Fee
Income

Total

Deposit
Charges

Fiduciary
Fees

Loan
Sales*

Other**

> $350bn
$10-350bn

4
85

49%
49%

51%
51%

35%
41%

9%
7%

4%
8%

1%
6%

20%
21%

$1-10bn
< $1bn
Total

446
5,561
6,096

63%
74%
53%

37%
26%
47%

29%
21%
35%

8%
8%
8%

4%
4%
6%

1%
1%
3%

15%
9%
19%

Note: *Includes securitization revenue. **Left unidentified in call reports, but a number of large banks have further disclosed that this reflects sizeable
contributions from mortgage banking, cash management, and merchant servicing fees (which we link to deposits). That said, some proportion is likely
unconnected to deposit relationships. Source: FDIC, Barclays Research

FIGURE 8
Select JPMorgan cross-sell revenue items from banking relationships, 2012 ($bn)
Treasury services revenue from corporate banking clients

$2.4bn

Mortgage originations revenue from branches

$2.2bn

Investment banking revenue from corporate banking clients

$1.6bn

Credit card revenue from originations through branches

$1.5bn

Investment mgmt revenue from branches

$0.6bn

Investment mgmt revenue from corporate banking clients

$0.5bn

Commercial card revenue from corporate banking clients

$0.2bn

Paymentech revenue from corporate banking clients

$0.2bn
0.0

Corporate Banking Customers

0.5

1.0

1.5

2.0

2.5

3.0

Retail (Branch) Customers

Note: Some items may overlap. Source: Company reports, Barclays Research

The most complete and accessible data available are for the US banking sector;
however, we believe the general principles apply to developed banking sectors globally.
For example, in Europe, post-provision revenue has been split roughly evenly between
credit and fee income since 2007 similar to US figures. We are unable to break down
fee income by source to the same degree as in the US data, but we can determine that
roughly 2/3 of European fee income is generated outside the investment bank. This
creates a pool of non-investment banking fee income (as a % of total revenue) that is
as least as big as that of US peers, suggesting that relationship-driven fee income may
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be similarly material. The limitations of the aggregate European data constrain our
ability to draw firm conclusions here, but we do think the available data support broad
similarities across geographies in terms of the importance of relationship-related fees.

2) Deposit relationships also promote the availability of credit


We identify another, harder to quantify benefit of a deposit base: the opportunity to use
these relationships to make more effective underwriting decisions and improve loan
performance. Whereas fees derived from non-credit financial products have a clear
effect on the price of credit, the evidence on relationship lending suggests it has as
much to do with the availability of credit.
A borrowers deposit accounts (ie, balances, transaction patterns, overdraft history, etc)
provide useful information about credit quality. A lender can leverage this information
to decide whether to lend to that customer 6 and at what price. After origination, an
ongoing branch/deposit relationship can allow a bank to better track performance,
address issues, and drive profitability.
Unlike fees, these benefits are not visible on an income statement, so we rely on studies
confirming a connection between relationships and loan performance. The literature is
particularly plentiful on the corporate side, where banks long-term relationships with
small and medium enterprises most clearly inform credit extension and structure.

Banks source a large portion of originations from depositors: Studies have indicated
that most small businesses borrow from a lender from which they obtain other
financial services. For example, various analyses have found that anywhere from 64%
to 72% of small business borrowers also have a deposit account with the lender. 7
This is matched on the retail side by a study from Purdue University (1999) that found
that 77% of retail borrowers in the sample had checking accounts with the lender.8

Information from these relationships allows banks to extend loans that would
otherwise be rejected because of a lack of information: The Purdue study
referenced above also found that in a sample of individuals seeking a retail loan,
having a checking account with the lender reduced the likelihood of being rejected
FIGURE 9
Data are limited outside the US, but the revenue
breakdowns look similar
% of Total Post-Provision Revenue

FIGURE 10
Likewise, the breakdown within fee income suggests at least
as large a pool of revenue may be related to relationships
% of Non-Interest Income

100%

100%

90%

90%

80%
70%

48%

47%

80%
60%

50%

50%

40%

40%

20%

52%

53%

21%

70%

60%

30%

16%

63%

30%
20%

10%

10%

0%
Europe
Credit income

U.S.
Non-Interest Income

0%
Europe
Net Fees

Trading & FV of Financial Assets

Other

Note: US data reflect 2003-2012 average of all commercial bank results.


Note: European data reflect 2007-2012 average of total group results.
European data reflect 2007-2012 average of total group results.
Source: FDIC, ECB, Barclays Research
Source: FDIC, ECB, Barclays Research
6
The value of relationship can be linked to less frequent credit-rationing, since the added information a bank
derives from a pre-existing and ongoing monitoring relationship allows it to take advantage of profitable lending
opportunities that it may otherwise have to forsake because of a lack of information (see Stiglitz and Weiss, 1981).
7
Cole (1998), Petersen and Rajan (1994).
8
Chakravaty and Scott (1999).

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by more than half. On average, approved borrowers had 70% longer relationships
with their lender than rejected borrowers and 80% more product relationships.
Similarly, a 1998 study found that in a sample of small businesses seeking credit,
47.5% of those without a bank relationship were rejected, compared with only a
14.5% rejection rate across the sample. 9 The importance of relationship variables
remained significant in both studies after accounting for age and credit quality.
These results demonstrate that pre-existing accounts generate sufficient
information to meaningfully change loan acceptance rates between otherwise
identical applicants. Deposit relationships and the information they generate
help unblock the frictions created by a lenders limited knowledge of a borrowers
creditworthiness. This allows borrowers greater access to credit and provides banks
with a greater number of presumably profitable lending opportunities.

Banks extend lending more quickly to customers with whom they have
relationships, especially longer and broader relationships. A wide range of studies
has found evidence that banks extend credit more easily to firms with which they
have a relationship. 10 For example, studies from the University of Chicago (1994)
and Northwestern University (1999) show that a small firms credit constraints
diminish twice as fast when it is building stronger bank relationships (measured by
duration or breadth of products)11 a finding reflected in studies on small business
lines of credit 12 and consumer lending access. 13
As above, these results support the conclusion that relationship information reduces
frictions in the lending process, allowing profitable lending that might otherwise
have been inhibited by information asymmetry.

Relationship lending can increase loan profitability: Data on the profitability effects
of relationship lending are limited but favorable. For example, a 2009 study on US
credit card lending found that the relationship-based credit card accounts in the
sample had a 10% lower default probability, 12% lower attrition probability, and a
700bp higher utilization rate. 14 Some studies have found evidence that banks do not
reduce interest rates even as they expand credit, potentially benefiting from exclusive
insight into a borrowers creditworthiness. 15 More broadly, the benefits of
relationship-based information (fewer bad loans, more line utilization) are likely
passed on to qualified borrowers (improved credit availability, lower rates).

Broker-dealer liabilities often serve a similar purpose


Deposits are not the only liabilities that can provide positive revenue feedback. Nearly
50% of the typical broker-dealer balance sheet is made up of matching liabilities and
assets that arise in parallel as part of a specific business or type of customer activity.
Similar to deposits, these liabilities are linked to a particular set of assets and augment
the revenue-generating activity of the firm. They have four major sources:

Matched-book repo and securities lending. A broker-dealer lends to one


counterparty against generally high-quality collateral, then uses this collateral
to secure a similar amount and duration of lending from another counterparty.
Repurchase agreements (repo) are the liabilities associated with this business,
paired with reverse repos on the asset side. Brokers make a (very) small spread
on their matched repo business (measured in basis points), which can add up to
meaningful profitability, depending on the size of the book. In addition,
9

Cole (1998).
Cole (1998), Petersen (1999), Chakravaty and Scott (1999), Petersen and Rajan (1994), Berger and Udell
(1994).
11
Petersen and Rajan (1994), Petersen (1999).
12
Berger and Udell (1994).
13
Chakravaty and Scott (1999).
14
Agarwal, Chomsisengphet, Liu, and Souleles (2009).
15
Petersen and Rajan (1994), although Berger and Udell (1994) and Chakravaty and Scott (1999) offer an
alternative interpretation.
10

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providing repo financing can be a key component of a broader relationship with
an institutional customer, similar to offering revolving lines of credit to
corporate borrowers.

Short-selling. Brokers execute short sales as part of their market-making business. A


short sale itself generates a liability: the obligation to buy the security (Securities Sold,
Not Yet Purchased). The asset is typically a reverse repo or Securities Borrowed
asset via which the broker sources the collateral sold short.16 In other words, selling a
security short is self-financing. It generates a liability (to return the security) and cash,
but the cash is used in the reverse repo to obtain the collateral to short.

Customer accounts. These arise mainly via prime brokerage businesses. The liabilities,
customer payables, are individual net cash balances in client margin accounts. The
brokers liability balance can reflect the proceeds from short sales executed for the
client, in which case the matching assets are Securities Borrowed. Alternatively, the
cash is effectively money on deposit with the prime brokerage business. Regulations
generally prohibit banks from using this as a source of own-asset funding; instead, it is
used to fund margin loans to other clients or remains as cash segregated in restricted
accounts. By allowing customers to leave net cash balances in accounts, banks are
able to more successfully offer wealth and brokerage services.

Re-hypothecation. Brokers engage in securities for securities repo, typically to satisfy


short-term needs for specific collateral. This is driven by the trading or securities
financing businesses (ie, to cover a short). In certain cases, the obligation to return the
collateral shows up on the balance sheet as a liability, with the security itself as the
corresponding asset. This typically happens when the securities are re-pledged.
Figure 11 lists the estimated sizes of these matching assets and liabilities on the YE2012
Merrill Lynch balance sheet. We use Merrill Lynch to represent the investment banking
portion of a moneycenter bank because uniquely for the space it continued to file
separate 10-Ks and 10-Qs despite being part of a larger banking conglomerate until late
2013. In aggregate, we believe the scale of its matching assets and liabilities are similar
to those of other large brokers, such as Morgan Stanley and Goldman Sachs, though
the size of individual lines can vary considerably by business.
FIGURE 11
Matching assets and liabilities comprise a large portion of the broker balance sheet:
Broker-dealer activities and estimated portion of Merrill Lynch balance sheet (2012, %)
Liabilities

Assets

Est. % of Merrill Lynch


2012 Balance Sheet

Matched-Book Securities Financing


Repo

Reverse Repo

Securities Loaned

Securities Borrowed

~20%

Short-Selling and Covering


Securities Sold, Not Yet Purchased

Reverse Repo
Securities Borrowed

~15%

Customer Accounts
Customer Receivables
Customer Payables

Securities Borrowed

~8%

Restricted Cash
Collateral Brought on Balance Sheet through Re-hypothecation
Obligation to Return Securities
Received as Collateral

Securities Received as Collateral

~3%

Source: Company reports, Barclays Research


16

These can also be driven by proprietary trading groups within a broker, although that activity has been largely
curtailed by the Volker Rule provision in Dodd-Frank.

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In some cases, these liabilities cannot, by definition, be replaced with wholesale debt or
equity. For example, customer payables arise naturally in a prime brokerage business
whenever customers have a net positive cash balance in certain accounts. The
offsetting assets also arise naturally as other customers buy on margin. Payables
cannot be replaced with any other form of liability. Similarly, the liabilities associated
with selling short (Securities Sold, Not Yet Purchased) are incurred as a matter of
course there is no straightforward way to avoid or restructure this liability.
In other cases, such as matched repo, the form of the liability is necessary to maintain the
viability of the associated business. Reverse repo effectively collateralized lending
would not be viable if financed by issuing wholesale debt. Most collateralized lending is
overnight and done at the GC rate (or less if the collateral is special). At any credit spread,
financing reverse repo with wholesale debt would generate a drag far in excess of the
margin banks charge. The only way the business makes sense is if the collateral in
collateralized lending is financed via repo. In other words, matched repo needs to be just
that matched. The asset and liability sides are viable only when done jointly.
Whatever the reason, the common feature of each of these liabilities is that the liability
structure is an inherent component of the associated business. They cannot be
replaced with wholesale debt or equity without disrupting that business. Although the
specifics are quite different than for deposits, the basic implications are the same: these
liabilities need to exist in specific forms or the underlying businesses cannot operate.

Summing up how MM fits and doesnt fit banks


Given the linkages we have identified between liabilities and revenue streams, we can
revisit the usefulness of applying the MM theory of capital structure equivalence to the
banking sector.
Clearly, if choosing to fund via one set of liabilities over another begets additional fee
income, then the two sets of liabilities are not equally attractive. This is the case for
deposits and the other special, customer-centric liabilities outlined above. By accepting
these types of liabilities, banks can earn revenue to which they would otherwise not have
the same access. This in itself indicates that one must be cautious about using MM to
justify mandating changes to the capital structure; mandated capital reform can be costly.
More specifically, regulations will introduce costs if they mandate banks to shift more of
their funding out of liabilities with positive externalities (additional fee income, better
loan performance, etc), such as deposits and certain broker-liabilities, and into liabilities
without these positive externalities, such as wholesale debt and equity.
Through this lens, certain proposals, such as the minimum holding company debt
requirement, would necessarily generate a cost. To the extent that such rules have
impact and require banks to use more wholesale funding and less customer-centric
funding than they would naturally, then the rules would also reduce the additional
revenue associated with customer-centric funding.
That said, as with all capital requirements, the cost of mandating minimum levels of
debt and equity must be weighed against the positive of greater financial sector
stability. Therefore, our assertion is not that increased capital requirements are bad, but
rather that new capital requirements which limit customer-centric liabilities are costly,
and that rules must balance these costs against the safety and soundness benefits.
Also, just as important as what does not fit is what does fit under MM. We do not
believe that wholesale debt and equity generate any special, positive revenue
externalities. Therefore, MM appears to work very well in explaining their relative
equivalence. Banks should, in theory, be indifferent to shifts in the mix between these
sources of funding. For example, increasing equity at the expense of reducing
wholesale debt should not introduce costs. The cost of debt should fall to reflect its
lower risk. While equity returns would fall, so too will the required return on equity
given that it would represent a less leveraged exposure to underlying cash flows.
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A framework for assessing the costs of capital reform


Now that we have a lens through which to examine changing capital structures, we can
use that framework to assess the potential costs associated with some of the specific
proposals that have been made or implemented. Most of the proposals to strengthen
the stability of the financial system rely on increasing either equity ratios or long-term
debt. Higher equity ratios would reduce the likelihood of bank failures and increased
wholesale debt may decrease their systemic impact, but we identify a series of negative
consequences that may also result from the proposed reforms. In summary, we believe
replacing customer-sourced liabilities with wholesale ones impairs credit creation for
both retail and institutional clients, while also potentially introducing system-wide risks.

Retail and business clients: Increased cost and impaired access to credit
A key implication of our analysis is that higher equity requirements would mean a
reduction in deposits (as a percentage of assets), and thereby both increase the cost of
credit and reduce its availability. In a competitive banking landscape, banks must adjust
the pricing of their products both credit and non-credit financial services to attract
customers. The economic value generated by selling non-credit financial services
subsidizes lending. Banks need to invest their customer deposits, and the expected
returns they require of that lending are lower in the presence of substantial fee income.
At the extreme, an all-equity bank would not have the same defined customer base that
a deposit-funded bank uses to issue debit cards, originate mortgages, and market other
financial services. Without those fees, the bank would need to earn more interest
income meaning a higher cost of credit to generate a commensurate return on
assets. Relationship lending strengthens the point. An all-equity bank would have no
depositors about which it can learn and, thus, make informed credit decisions. There is
clear evidence that arms-length borrowers have a harder time getting credit.
In sum, banks would miss out on profitable lending opportunities and related service
revenue, while businesses and consumers would face incrementally impaired access to
credit at an incrementally higher price. More broadly, banks forced to become more
selective deposit-takers would likely choose to reduce/refuse those deposits least likely
to produce additional sources of revenue and potentially push a portion of lowerincome account holders out of the traditional banking system.

Capital markets clients: Attack on repo


Deposits are not the only customer-centric liability on a banks balance sheet, and brokerdealer activities also appear vulnerable to capital structure reform. As a result, we would
expect broker-dealer clients to face reduced liquidity and potentially higher cost capital
markets services. As outlined above, client execution and service can generate assets and
liabilities on bank balance sheets. As balance sheet capacity becomes increasingly
constrained, even for very low-risk activities, banks are likely to charge for this newly
scarce resource and, in turn, services that show up on balance sheet would become more
expensive. For example, maintaining net credit balances, short-selling, and collateral
transformation relatively low-risk activities for banks that will likely face increasing
return thresholds would become incrementally more expensive for clients.
This is perhaps most evident in matched book repo. The net spread from matched repo
borrowing from money market funds and lending to capital markets borrowers
generates a small return on assets (ROA), commensurate with high-quality >100%
secured and daily margined borrowing. Banks will likely face pressure to downsize these
matched books as equity requirements rise to meet sticky equity return targets. Repo
borrowers will face impaired access to secured credit, repo lenders (ie, money market
investors) will receive reduced remuneration on invested capital, and both will likely
increasingly turn non-regulated intermediaries. More broadly, this friction would likely
decrease banks willingness to intermediate in fixed income markets, decreasing
liquidity and incrementally increasing rates.
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Potentially increased banking sector risk: Incremental funding would be


directed not to lending, but to other, high-risk, asset classes
We believe that requirements to increase wholesale financing (debt or equity) as a
percent of total liabilities would likely generate a matching increase in assets typically
funded by wholesale financing, namely trading securities. More specifically, banks
would likely seek to increase holdings of lower quality trading assets in their broker
dealer, such as corporate securities, that are not generally funded with repo.
Importantly, we would not expect banks to use the proceeds from increased wholesale
debt or equity to make loans in the current environment; that is not how those funds
are used now across a wide range of banking entities, and we see no reason why that
would change. From an empirical perspective, unsecured debt issuance simply cannot
be traced to loan growth. With current loan-to-deposit ratios in the US well below
100%, we do not see how additional wholesale debt or equity would be deployed as
loans, as opposed to more natural use in the securities business.
FIGURE 12
US banking sector loan-to-deposit ratio
120%
100%
80%
60%
40%
20%
0%
1935

1945

1955

1965

1975

1985

1995

2005

Source: FDIC, Barclays Research

When banks source a greater portion of their liabilities from non-deposit sources, their
asset concentration in loans declines (Figure 13). In other words, banks with more nondeposit funding do not direct this funding toward loans, but rather to other asset
classes. As Figure 14 shows, the largest banks with a greater portion of debt funding
also have a greater asset concentration in trading securities. In practice, debt is linked to
the trading book, not the loan book.
FIGURE 13
Loans % assets increases as deposits % liabilities rise,
25 US bank aggregate (plus GS & MS), 2Q13

FIGURE 14
Trading securities % assets increase as debt % liabilities
rise, 8 US SIFIs, 1Q13

Loans %
Assets
90%

45%

80%

40%

70%

35%

60%

30%

50%

25%

40%

20%

30%

15%

20%

10%

10%

5%

0%
10%

Trading Sec.
% Assets

0%

30%

50%

70%

Deposits % Liabilities
Source: SNL, Barclays Research

13 February 2014

90%

0%

5%

10%
15%
20%
Debt % Liabilities

25%

30%

Includes BAC, BK, C, GS, JPM, MS, STT, and WFC. Source: SNL, Barclays Research

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If we are correct, these asset changes from higher equity or wholesale debt requirements
would raise the stakes of regulatory supervision. If banks respond to higher debt and/or
equity requirements by increasing their ownership of lower quality securities, the asset
portfolio would become riskier. In turn, the importance of regulatory supervision and
accurate risk-weightings would rise. The incentive for banks to own securities that are
efficient in an RWA context (ie, a combination of high yield and low RWAs) rises as
banks are forced to raise more wholesale financing. We think a shift of this magnitude
could affect regulators ability to monitor and assess evolving risks on the balance sheet.

Does more equity and/or wholesale debt really mean


fewer deposits and other customer-sourced liabilities?
Our analysis outlines the linkage between depositors and revenue, and the potential
costs of breaking this linkage. Would capital regulations truly break this relationship?
Would a mandate to hold incremental higher wholesale debt and equity necessarily
imply lower deposits and other customer-sourced liabilities?
For the vast majority of banks in the US, we believe the answer is simple: yes. After
considering capital requirements and liquidity needs, deposits represent essentially all
remaining liabilities at all but the very largest US banks. This indicates that higher equity
or wholesale debt requirements would force a reduction in the proportion of deposits,
thereby generating the costs we outline above, for most of the sector.
Admittedly, US moneycenter banks do not fit this mold. At first glance, a large balance
of non-deposit liabilities would indicate that these banks could reduce non-deposit
funds rather than reduce deposits if they were required to finance themselves with a
larger proportion of equity or long-term debt. However, the business mix of these large
institutions also differs substantially from that of other banks. The moneycenter banks,
such as Bank of America, Citigroup, and JPMorgan are distinct from the rest of the
sector in that they combine significant broker-dealer investment banking franchises
with traditional banking operations. This mix is reflected in the reported balance sheet.
Consolidating the bank and broker-dealer entities (as well as holding company
liabilities) produces the distinct funding profile of the moneycenter bank depicted in the
rightmost column of Figure 15. Fortunately, certain banks report separate capital
structures for bank and broker subsidiaries (Figure 16)
FIGURE 15
Most banks maximize deposits, but the largest banks are more complex: US domestic
bank-centric holding companies funding profile by asset size
# of Banks:
% Assets:
100%
90%

556
3%

401
6%

50
3%

45
7%

7
4%

9
17%

4
61%

10%

10%

12%

11%

11%

12%

10%

82%

81%

76%

74%

77%

71%

80%
70%
60%
50%
40%
30%

54%

20%
10%
0%
<$1bn

$1-5bn

$5-10bn

$10-100bn $10-100bn $100-500bn

>$500bn

Deposits

Fed Funds

Repo

Trading Liabilities

Other Borrowings

Sub Debt

Other

Equity

Note: Excludes BHCs with greater than 50% non-bank assets and/or greater than 50% non-bank operative
revenue. This excludes, for example, Goldman Sachs, Morgan Stanley, and HSBC North America. Source: SNL,
Barclays Research

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FIGURE 16
Moneycenter banks funding profiles reflect banking and broker-dealer business
lines: Simplified funding profile of moneycenter banks
(Smaller than Bank)

100%
90%
80%
70%

60%
50%
40%
30%
20%
10%
0%
Traditional Banking Subs
Deposits

Securities Financing

Broker-Dealer Subs
Trading

Client & Other Payables

Moneycenter
Borrowings

Equity

Source: SNL, Barclays Research. Based on available data from Bank of America, JPMorgan Chase, and Citigroup.

Two conclusions are immediately apparent:

Funding at moneycenter bank subsidiaries resembles that of smaller banks. The


mix of deposits, other liabilities, and equity at the moneycenter bank subsidiaries
looks similar to the funding profiles of most other banks. Deposits make up nearly
75% of the liability stack, with equity making up the next largest component. The
bulk of the remaining liabilities is driven by liquidity management. This is obscured
in consolidated figures by the addition of the broker-dealer. When the subsidiaries
are separated, as in Figure 16, it becomes clear that the bank subsidiaries operate
with near-maximum deposits and that the broker-dealer entities generate the
majority of consolidated non-deposit/non-equity funding.

The broker-dealers funding profile is in large part composed of the key,


customer centric, revenue-associated liabilities we outlined above. As illustrated
in the center column, broker-dealers have a substantially different set of liabilities
than traditional banks. However, many of these liabilities roughly 50% of the total
are of the customer-centric, revenue-generating liabilities we have outlined above.
Forcing a reduction in these balances would produce much the same effect as
reducing deposits in that revenue generation would be compromised.
Therefore, while the picture is somewhat more complex, US moneycenter banks are
also operating near constraint. We therefore believe that raising capital requirements
whether through minimum equity or minimum wholesale debt as a percentage of the
balance sheet would constrict the ability of US banks of virtually all sizes to interact
with clients in their respective business lines, impairing revenue.
The answer is more complicated when we attempt to extrapolate these results to other
developed banking sectors. In Europe, wholesale funding has historically represented a
larger portion of the capital structure. As of YE12, the largest European banks funded
themselves with 24% wholesale debt and 7% equity (as a % of total assets). Most realistic
proposals do not propose increasing the combined size of wholesale debt and equity
above 31% of assets, suggesting that incremental wholesale financing requirements can
be absorbed without major negative effect. That said, we note that loan-to-deposit ratios
have been rapidly falling in the European banking sector, suggesting that banks natural
dependence on wholesale funding may be shifting markedly downward in the post-crisis
environment. Therefore, we believe there may be room for wholesale debt and equity
minimums to rise in Europe without causing immediate friction; but, we also believe such
changes could become a constraint over time, as European banks would eventually be
prevented from lowering their wholesale funding dependence further.

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FIGURE 17
Wholesale funding has historically represented a larger
portion of European capital structures
Wholesale Debt & Equity % Total Assets, YE12
35%

FIGURE 18
but rapidly decreasing loan-to-deposit ratios suggest
that natural dependence on wholesale funding is declining
Loan-to-Deposit Ratio, European Banking Sector
140%

30%

7%

135%

25%

130%

20%

10%

15%

125%

26%

120%

10%

115%

14%

5%

110%

0%
Large European Banks
Wholesale Debt

Large U.S. Banks


Equity

Source: Company reports, SNL, ECB, Barclays Research

105%
2002

2004

2006

2008

2010

2012

Source: Company reports, SNL, EBF, Barclays Research

Banks link specific assets to specific liabilities


Our analysis identifies a natural correspondence between certain assets and certain
liabilities. For example, deposits functionally support lending. It turns out that many types
of broker-dealer liabilities also arise in a specific relationship with corresponding assets.
Customer payables provide funding for customer receivables; repo borrowing matches
repo lending; short-positioning is linked to securities borrowed, etc.
This intuition can be expanded to banks and brokers more generally: a banks asset and
liability structures match. A certain set of assets is generally funded by a certain set of
liabilities. Just as this asset-liability relationship was evident in the broker-dealer analysis
above, it is also visible in the consolidated asset and liability profiles of the largest US
banks. In Figures 16 and 17, we include three of the six largest US banks: Wells Fargo,
(traditional banking); Citigroup (a traditional retail and commercial bank combined with a
large investment bank); and Goldman Sachs (investment banking).
FIGURE 19
Asset profile comparison (2012, % of total assets)
100%
90%
80%

7%
31%

70%
60%
50%
40%

75%
75%
51%

30%
20%

8%

10%
0%
Wells Fargo
Cash

Securities (AFS & HTM)

Citigroup Inc.
Net Loans

Reverse Repo

Goldman Sachs
Trading Assets

Other

Source: Company reports, Barclays Research

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FIGURE 20
Funding profile comparison (2012, % of total liabilities and equity)
100%
90%
80%

Primarily
Customer
Payables

26%
43%

70%
60%
50%
40%
30%

67%

71%
50%

20%
10%

7%

0%
Wells Fargo
Deposits

Repo

Citigroup Inc.
Trading Liabilities

Wholesale Debt

Goldman Sachs
Equity

Other

Source: Company reports, Barclays Research

From left to right across Figure 19, the concentration of traditional banking assets
declines and the concentration of trading-related assets increases. For Wells Fargo,
75% of assets comprise loans and HTM/AFS securities assets typical of commercial
banking while only 7% is allocated to reverse repo and trading securities. Citigroup
displays more parity between the two asset buckets, while Goldman Sachss investment
banking focus is clearly visible in the high concentration of repo and trading securities.
This is mirrored by a similar shift in funding structures (Figure 20). Wells Fargos
concentration in deposit funding and lesser reliance on wholesale funding from
equity, debt, repo, and trading liabilities reflects its asset structure. Citigroups heavier
reliance on wholesale finance, but still large deposit base, reflects its dual moneycenter
nature on the asset side. Finally, Goldman Sachss minimal deposit funding but large
trading and wholesale borrowings reflect its investment banking business.
Regulatory constraints can explain some of this pattern: banks are restricted from using
deposits to finance their broker-dealers. Wells Fargo cannot use its deposits to fund a
large trading securities portfolio la Goldman, but instead makes loans. However, the
regulations do not explain why neither Citigroup nor Goldman uses more than a minimal
proportion of wholesale financing in its lending business. There are no restrictions in that
direction, suggesting that the linkages are intrinsic to the underlying business, as opposed
to driven solely by the constraints on deposit-taking subsidiaries.
Even within institutions with similar business models, differences between liabilities
correspond with the expected differences in assets. We compare GS and MER across a
few dimensions in Figure 21. GS has more trading assets and a higher level of wholesale
debt and equity. GS also has more customer receivables and more payables, both
indicating a larger prime brokerage business.
FIGURE 21
Further linkages between assets and liabilities: brokers
GS

MER

Trading Assets

43%

37%

Wholesale Debt & Equity Funding

34%

27%

Customer Receivables

8%

3%

Customer Payables

20%

9%

Source: Company reports, Barclays Research

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In this view of banking, each type of liability has an associated asset and business line
(Figure 22). An important implication is that the flaws in applying Miller-Modigliani to
banks extend beyond deposits. In our view, the entire return profile of the business of
banking hinges on the ability to exploit the natural linkages between specific assets and
liabilities. An understanding of these linkages and the reaction function of banks to
changes in their capital structures is the key to understanding the costs or implications
of the many proposals to strengthen the stability of the financial system.
FIGURE 22
Natural equivalence between bank assets and liabilities
Liabilities

Assets

Traditional Banking
Deposits

Loans
Very Liquid Securities

Matched-Book Securities Financing


Repo

Reverse Repo

Securities Loaned

Securities Borrowed

Prime Brokerage
Customer Receivables
Customer Payables

Securities Borrowed
Restricted Cash

Market Making
Repo
Trading Assets

Wholesale Debt
Equity

Source: Company reports, Barclays Research

Conclusions
There are two competing viewpoints on the likely effect of proposed capital structure
changes aimed at making the global banking sector more stable. Some argue that such
reforms (ie, higher equity) are costly; others, applying MM, argue that these concerns are
unjustified. Having reviewed the validity of applying MM to banks to determine the
potential costs of capital reform, we conclude that some, but not all, types of capital
reform may be costly.
Certain classes of liabilities appear to fit well in the MM system. For example, wholesale
equity and debt are issued to third-party investors who make standard risk-reward
assessments when choosing what to invest in. We can find no obvious positive revenue
externalities associated with these liabilities; thus, banks should be relatively indifferent to
shifting funding balances between these sources. However, where specific liabilities, such
as deposits and certain broker liabilities, generate positive externalities (such as related fee
income or better loan performance) they then violate the assumptions behind MM.
Clearly, if choosing to fund via one set of liabilities over another begets additional fee
income, then the two sets of liabilities are not equally attractive. Forcing a reduction in
these special liabilities would restrict the profitability of the underlying asset base, creating
a cost that would be passed on to various stakeholders.
Therefore, we conclude that capital reform can be costly if and when it forces banks to
decrease customer-centric liabilities with positive externalities, such as deposits and
certain broker-dealer liabilities. The costs of reform would be visible in impaired access
to credit for borrowers, a higher cost of credit, and reduced market liquidity, as banks
deploy customer-centric liabilities in these businesses. Alternatively, we do not see
reform as costly where regulations merely shift the mix between sources of wholesale
funding without these externalities, such as equity and debt.

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Our analysis suggests that capital requirements are mostly likely to be costly in the US,
where wholesale funding represents a relatively small share of bank funding. In the US,
proposals such as the minimum debt requirement may effectively cap customer-centric
liabilities below natural levels and introduce related costs. Alternatively, the capital
requirements may be less costly in Europe, where banks have typically funded
themselves with a higher percentage of wholesale funding by choice. In this region,
banks may be able to limit the costs of higher equity requirements by shifting debt
balances lower and leaving customer-centric liabilities unchanged.
Furthermore, we have identified additional negative side-effects that may result from the
quick succession of changes to capital structure regulation. Most notably, an increase in
required wholesale funding may not only limit positive externalities in fee income; it may
also encourage banks to subtly add industry risk in ways that regulators have historically
found difficult to protect against. Nevertheless, our assertion is not that all capital
requirements are bad, but rather that mandated capital structure reform can have costs
and that these costs must be balanced against the benefits of financial stability.
Looking ahead, regulatory issues will remain center stage for banks, as well as their
investors and clients. We believe the process of continuous, material regulatory change is
set to continue for the foreseeable future.

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CHAPTER 5

The future of US housing finance


Ajay Rajadhyaksha

Even as the US housing market has rebounded sharply in the past three years,
housing finance has not. The extent of government involvement in mortgage
lending poses unacceptable risks to the taxpayer. Bank portfolio lending,
private-label securitizations, covered bonds, and public/private partnership
models offer alternatives to reduce reliance on the government guarantee, but
they all come with their own limitations.

+1 212 412 7669


ajay.rajadhyaksha@barclays.com
Sandeep Bordia
+1 212 412 2099
sandeep.bordia@barclays.com

Among existing legislative proposals, the Corker-Warner bill is the most promising,
and will likely be the template for any final legislation. It requires the first-loss
piece to be backed by private capital but also provides an explicit government
backstop in extraordinary circumstances. We estimate that $400-450bn of private
capital is needed to absorb the credit risk of all $4-4.5trn in governmentguaranteed GSE mortgages, assuming a 10% first-loss piece. The private markets
cannot raise this amount easily. In our view, a government retreat will need to be
spread over at least 10-15 years, not the five years proposed by Corker-Warner.

Jasraj Vaidya
+1 212 412 2099
jasraj.vaidya@barclays.com
Dennis Lee
+1 212 412 2099
dennis.lee2@barclays.com

In addition to legislation, new Qualified Mortgage (QM) rules will make lending
to lower-credit borrowers more challenging. Overall, in a new housing finance
system, we expect rates to rise only marginally for clean credit borrowers, who
currently account for more than three-quarters of originations. But lower credit
borrowers could see rates rise by 50bp or higher. Mortgage credit availability is
unlikely to worsen from current levels, even with new lending rules.

Passage of housing finance legislation might take a few more years. The longer it
takes to pass a bill, the greater the likelihood that some version of the status quo
will prevail. But even if the status quo does prevail, the market is likely to move to a
situation similar to that envisioned by the Corker-Warner bill, assuming recent risk
transfer initiatives 1 and QM lending rules stay in place. The difference will be in
the level of private sector involvement and extent of taxpayer protection (both
higher with legislation). In sum, a smooth transition to a new housing finance system
(with lower government involvement) is possible as long as the transition occurs
over an extended period and with a government backstop. But if Congress insists
on a purely private solution, or a compressed timeframe for transition, mortgage
credit and the US housing market could be impaired
Housing finance reform is a complex topic; hence, we divide this article into six parts:
Part I shows that even as housing has rebounded, housing finance remains dependent
on the US government. We also look at the policy goals behind government
involvement and compare the US system with those in other countries.
Part II looks at the various options that the US government has to reduce its footprint in
housing finance. We emphasize the need for any transition to be orderly and gradual.
Part III looks at the various legislative solutions being proposed. We identify Corker-Warner
as the legislation that is most likely to resemble an eventual bill.
Part IV looks at the amount of private capital that will ultimately be required and various
ways in which it can be raised. We also discuss the new credit risk transfer deals from
Fannie Mae and Freddie Mac.
Part V discusses the recently issued rules for qualified mortgages and analyzes how
these will interact with housing finance legislation.
Part VI takes a longer-term look at how mortgage credit availability and mortgage rates
may be affected in various housing finance scenarios.
1

13 February 2014

For example, the STACR/CAS credit risk transfer deals, which are explained later in the article.

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Part I: Housing has rebounded but housing finance has not


More than seven years have passed since home prices peaked and the mortgage credit
crisis began to unfold in 2006. Since 2011-12, there has been a sustained recovery in the
housing market. Prices have risen by 20-25% since bottoming in Q1 12 (Figure 1). After
peaking during the crisis years, existing and new home sale inventories (in terms of
months of supply) have also fallen below pre-crisis levels (Figure 2). Although there are
still borrowers at risk of default, loan modifications have markedly reduced the pressure of
foreclosure supply. Overall, the market has recovered strongly in the past 18-24 months.
During this period, the US home-ownership rate has given back almost all of the gains
made during the mortgage credit boom of the 2000s. Home ownership has dropped
from its peak of around 69% to the mid-60% area, which is close to levels last seen in
1996 (Figure 3). The numbers are even lower once we strip out seriously delinquent
and foreclosed mortgages (shadow inventory). At that point, the real homeownership
rate falls to the low 60% range, which we believe is more sustainable.

Despite housing recovery, housing finance still dependent on government


Although the housing market has rebounded after working through the excesses
prevalent prior to 2008, mortgage finance has not. Over the past 4-5 years, the share of
government guaranteed mortgages (FHA, Fannie Mae, and Freddie Mac) has remained
above 80% (Figure 4). This level has persisted even as the government has pushed up
the price of its guarantee: the mortgage insurance premium (MIP) for FHA loans has
risen by almost 80bp, while average guarantee fees for the GSEs have risen by 30-35bp.
Meanwhile, the private securitization market has remained mired in legacy issues, and
increasing bank capital charges and rep and warranty put-back concerns have
restricted the ability of private capital to compete with government-backed loans.

Mortgage underwriting standards remain fairly tight


Mortgage underwriting standards remain near historical tights, with the average credit
scores of loans originated by the GSEs near all-time highs. For loans made by the GSEs in
2009-12, average credit scores (FICOs) peaked at 760, from 720-730 pre-crisis; average
combined loan-to-value ratios (CLTVs) dropped to 67-70%, from the low-mid 70s in
2007; and front-end debt to income ratios (DTIs) plunged to 32% from the high 30%
range in 2007 (Figure 5). Although greater involvement by private-sector mortgage
insurers has recently reduced down-payment requirements (especially for purchase
loans), mortgage credit availability remains depressed, with the FHA the only source of
credit for poor-credit-quality borrowers. The GSEs continue to keep mortgage
underwriting standards tight, especially in terms of DTI and FICO. For example, >43% DTI
loans now represent only 15% of GSE purchase originations, down from 30-35% precrisis. Similarly, low FICO originations remain virtually non-existent among GSE pools.
FIGURE 2
New and existing homes months of supply since 2000

FIGURE 1
National HPI since 2009
125%

14

120%

12
10

115%

110%

105%

100%

95%
Jan-09

Aug-10
Corelogic

Mar-12
Case Shiller

Source: CoreLogic, FHFA, S&P, Bloomberg, Barclays Research

13 February 2014

Oct-13
FHFA PO

0
Jan-00

Oct-02

Jul-05

Existing Homes

May-08

Feb-11

Dec-13

New Homes

Source: National Association of Realtors, US Census Bureau, Barclays Research

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FIGURE 3
Homeownership rate continues to fall

70%
68%

FIGURE 4
Despite unprecedented government support in the
mortgage market

Homeownership
Rate

Gov't % of
Total

100%
90%
80%
70%

66%

60%
50%

64%

40%
30%

62%

20%

60%
Mar-90

10%

Mar-95

Mar-00

Mar-05

Mar-10

0%
1990

Homeownership Rate

1993

1996

1999

2002

2005

2008

2011

Rate Adjusted for Shadow Inventory


Note: Homeownership rate shown is the seasonally-adjusted rate. Source:
MBA, US Census Bureau, Barclays Research

Source: Inside Mortgage Finance, Barclays Research

FIGURE 5
Freddie Mac Average characteristics for all loans

FIGURE 6
Freddie Mac Proportion of higher-risk loans among
purchase owner occupied loans

90

770

80

760
750

70

740

45%
40%
35%
30%
25%

60
50
40
30
1999

50%

730

20%

720

15%

710

2001
DTI

2003

2005

2007

2009

LTV

2011

700
2013

FICO(Right Axis)

Source: Freddie Mac, Barclays Research

10%
5%
0%
1999

2001

2003

2005

FICO <680

2007
DTI >43

2009

2011

2013

LTV>80

Source: Freddie Mac, Barclays Research

Private securitization markets remain dormant


Private securitization markets remain uncompetitive, primarily because the senior
portion of a new-issue private-label securitization trades significantly worse than
agency MBS. Recently issued non-agency AAAs with 7% credit support are currently
trading 3-4 points below their agency MBS counterparts. As a result, despite their
cleaner credit profiles and possibly lower credit costs, these deals cannot compete with
the execution available in the agency MBS markets. In contrast, the commercial
mortgage market has experienced renewed origination and securitized issuance. CMBS
issuance levels are now approaching almost half of their 2005-07 levels. Meanwhile,
private-label RMBS2 issuance today stands at less than 2% of 2005-07 issuance levels.

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Mortgage loans that are not guaranteed by the government.

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FIGURE 7
RMBS/CMBS issuance over time
1200

240

1000

200

800

160

600

120

400

80

200

40

0
2000

2002

2004

2006

RMBS Yearly originations ($bn)

2008

2010

2012

0
2014

CMBS Yearly originations ($bn)

Source: Trepp, LoanPerformance, Inside Mortgage Finance, Barclays Research.

Government role in housing finance: Goals vs reality


Government involvement in US housing finance is different from that of most other
countries (see US housing finance: No silver bullet). The countries shown in Figure 8
have home ownership rates similar to those in the US, despite little to no government
involvement in housing finance. And although making homes affordable has long been
a goal of US housing policy, the truth is more complicated. As affordability goals
(among other factors) caused down-payment requirements to be reduced over the past
decade, the net result was that home prices were pushed up. Consequently, housing
became less affordable; lower down-payments were offset by higher home prices
(Figure 9). And as 2008 showed, a system that keeps housing affordable by lowering
down-payments can become unsustainable.
Admittedly, none of these issues was of concern prior to 2007. The GSEs rarely reported
any losses, while the FHA/VA never had to draw liquidity from the US Treasury to keep its
Mutual Mortgage Insurance (MMI) Fund above required levels. By 2005-06, a
combination of lax lending standards and significant leverage in the financial system had
driven housing prices to unsustainable levels. As borrower defaults began to rise in 2007
FIGURE 9
Lower down payments offset by home prices

FIGURE 8
Home-ownership rates across countries
100

Homeownership
rate%

15%

80

Price effect
Interest rate effect (RHS)
LTV effect

10%

60
5%

40
0%

20

-5%

Source: MBA, Barclays Research

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US

UK

Switzerland

Spain

Netherlands

Germany

Japan

Ireland

Denmark

Canada

Australia

-10%
1986 1989 1992 1995 1998 2001 2004 2007
Note: The figure shows decomposition of our enhanced affordability metric
into changes driven by home prices, down payments and interest rates. While
higher LTVs helped affordability, it may have also resulted in higher prices.
Please see US housing finance: No silver bullet for more details.
Source: Barclays Research

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and 2008, home prices steadily declined, resulting in further defaults and creating a
vicious cycle in the US housing market. These mortgage defaults eventually led to massive
losses for the GSEs and, given their de minimis capital levels, Fannie Mae and Freddie Mac
were placed into conservatorship by the US government. The government and, by
extension, the US taxpayer eventually provided almost $200bn of capital injections into
the GSEs via purchases of senior preferred equity to keep the two entities solvent. Even
more striking, the combined losses of Fannie Mae and Freddie Mac between 2008 and
2011 offset all of the net income the two entities had generated since at least 1990.
The amount of risk that the
taxpayer is taking on remains a
concern

The current situation, with either an explicit or implicit government guarantee covering
more than 80% of all originated mortgages, is even more problematic from the taxpayers
perspective. Mortgages originated today are much safer than those originated in 2005-07
and g-fees charged by the GSEs and the FHA are significantly higher, but the amount of
risk that the taxpayer is taking on remains problematic. A related problem is the lack of
market pricing on the credit risk of GSE-guaranteed mortgages. Although the GSEs and,
to a lesser extent, the FHA use some form of risk-based pricing, this approach is still not
based on the market price of risk. As a result, there is potential for the GSEs to misprice
credit risk when credit conditions change.

Part II: Any government retreat needs to be orderly


Given that other countries boast similar homeownership rates without government
involvement, and given that affordability goals can have unpleasant side-effects, the
case for reducing government involvement in housing finance seems straightforward.
But it is critical that any government retreat be orderly and spread out over several
years. For example, in US housing finance: No silver bullet, we showed (hypothetically)
that transferring all existing government guaranteed mortgages to the balance sheets
of the US banking system would result in two consequences:

Good-credit-quality borrowers would get rates similar to existing government


guaranteed rates. Borrowers with slightly lower credit quality would see slightly
higher mortgage rates.

Poor-credit-quality borrowers would see very high mortgage rates. In fact, they
probably would not get mortgages at all, causing credit availability to contract sharply.
Credit availability, more than simply the level of mortgage rates, is the key to a functioning
housing market. Consider the experience of Q1 07, when home prices began to fall and
defaults to spike. The catalyst was not job losses; the unemployment rate was below 5%.
The marginal source of credit availability at that point was the non-agency (or private)
mortgage market. As stretched non-agency MBS prices began falling in the secondary
markets, lenders stopped making new loans in the primary markets3. And as mortgage
credit availability suddenly tightened, home prices started falling and defaults rising.
Government can act as a
countercyclical backstop to
ensure that credit availability
does not disappear during
periods of financial/economic
stress

Besides an orderly transition, there is another reason to keep the government involved.
We believe that government can act as a countercyclical backstop to ensure that credit
availability does not disappear during periods of financial/economic stress. Initially, this
will mean that while the private market can be encouraged to take on a larger share of
credit risk, the government will likely continue to take on tail risk. As long as the first
loss piece is held by longer-term mortgage credit investors and the risk is not allowed to
be obfuscated, as it was by the ABS CDO market 4 in 2006 and 2007, the markets selfregulatory instincts should kick in before any real excesses take hold. In such
circumstances, we believe it is unlikely that taxpayers would be called upon to bear the
burden of mortgage credit losses.

New Century, one of the largest sub-prime lenders in the country, went out of business in February 2007.
The CDO market enabled some originators and lenders to transfer all economic risk from the mortgages they
originated and securitized, at times without investors in the MBS deals being aware of this fact.

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What are the various options for reducing government involvement?


Two broad approaches can be taken to reduce government involvement in housing
finance. The first is a complete privatization of the market; this can be accomplished via
the following methods, either in isolation or together:

Private-label securitizations involve pooling together a large number of mortgages


into a securitization trust, which is then tranched into multiple classes of varying
maturities and credit profiles, each of which is sold off to different groups of investors.

Covered bonds involve banks pledging a pool of mortgages (the cover pool)
against their issued bonds, such that the bonds are guaranteed by both a general
claim against the issuing financial institution and the cover pool of assets.

Portfolio lending involves banks originating mortgage loans and holding them
directly on their balance sheets, typically in held-to-maturity accounts.
The second approach is to include greater private market participation in the mortgage
markets without completely eliminating the governments role, via a public-private
partnership that transfers the bulk of mortgage credit risk to private entities but
preserves the governments provision of a catastrophic backstop. Private entities would
be exposed to a first-loss credit piece on a pool of mortgages, while the government
would explicitly guarantee all losses beyond a certain threshold.
FIGURE 10
Various options for reducing government involvement in the mortgage space
Type of
housing
finance
system
Complete
privatization

PublicPrivate
Partnership

Form of system Benefits

Problems

Possible size

Securitization

Wide dispersion of risk


transfer to multiple parties,
market forces dictate pricing
on new mortgages, the
infrastructure to issue privatelabel MBS is already in place.

Regulatory hurdles under new QRM*


requirements and Basel III capital and
leverage ratio rules may limit the
potential size of this market. Memories of
the 2007-09 recession, driven by nontraditional and subprime securitizations,
make it unlikely that policymakers would
wholeheartedly adopt this approach.

Prior to the significant run-up


in home prices that started in
2004, non-agency
securitizations represented 510% of total mortgage
originations. We believe that
private-label securitizations
can eventually return to these
normalized levels ($500bn $1trn in outstandings).

Covered
bonds

Issuers of covered bonds (ie,


banks) retain "skin in the
game" and, thus, are more
likely to originate high-quality
loans.

Legislative and regulatory framework for


covered bonds not yet in place; many US
banks do not have the infrastructure to
issue covered bonds; mortgage credit
and convexity risk will be concentrated
among a handful of large financial
institutions; there is likely to be a greater
asset/liability mismatch for issuing
banks.

While covered bonds are


unlikely to become the
dominant source of
mortgage financing over the
next decade, they could still
represent a healthy portion of
the overall mortgage market,
perhaps eventually helping to
fund $200-300bn in
mortgages.

Portfolio
lending

Since banks have full


exposure to the credit risk on
these loans, they are likely to
utilize very prudent
underwriting standards.
Whole loans held on balance
sheet are not subject to the
same capital and regulatory
rules as private-label
securitizations.

Banks are likely to concentrate their


underwriting on only the cleanest-credit
borrowers, locking out weaker-credit
ones from owning homes; larger
financial institutions will likely have an
unfair advantage, as they have the
lowest-cost liabilities via retail deposits
and wholesale funding; banks may have
more asset/liability mismatches when
originating fixed-rate mortgages using
short-term deposits.

Portfolio lending has typically


represented 40-50% of total
mortgages outstanding and
can likely represent around
the same percentage in the
future (~$4trn in
outstandings).

Credit risk
shedding
transactions

The structure and liquidity


benefits of the agency TBA
program can continue in its
current form.

Finding investors for all of the first-loss


credit risk may be difficult: the
government is still subject to losses under
catastrophic scenarios; selling the firstloss credit tranche in a deep recession
could become prohibitively expensive.

Difficult to gauge, though the


size of the market utilizing
credit risk transfer
transactions could approach
that of the agency MBS
market, at about $4-4.5trn.

Note: Qualified Residential Mortgage, explained later in the article. Source: Barclays Research

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Goals for a future housing finance system


If US policymakers ultimately decide that the government needs to play a role in
housing finance, they will need to determine what kind of role. The options range from
full nationalization of the mortgage market to a completely private model. Whatever the
outcome, policymakers will want to reach a housing finance system that meets the
following goals in a balanced fashion:

The system must protect the taxpayer.


There are advantages to having a countercyclical component to the housing system
so that mortgage finance is expanded during recessionary environments and
contracted when the economy is on stronger footing.

There is likely a role for the housing system to provide social benefits to low and
moderate income households.
A long-term housing finance
system in the US requires a
combination of substantial
participation from private
entities and some level of
government support

Full nationalization would probably meet the second and third policy goals, but it would
not protect the US taxpayer. Similarly, the government would have no credit risk under
a fully private mortgage market, but this model would fall short on the second and third
policy goals. As such, we believe that a long-term housing finance system in the US
requires a combination of substantial participation from private entities and some level
of government support.

Part III: Legislative solutions Corker-Warner looks most likely


Over the past few years, there has been no shortage of legislative proposals to address
the future of the US housing finance system. Most policymakers appear to be focused
on reducing the governments role in supporting the mortgage market, although ideas
about how to extricate government support differ from proposal to proposal. In most
cases, the GSEs are either completely dissolved or have their responsibilities
significantly reduced. Figure 11 summarizes the key elements of each bill.

FIGURE 11
Summary of recent legislative proposals to reshape the US housing finance system
Legislative proposal

Level of gov't involvement

Corker-Warner Bill

What happens to the


GSEs?

Credit risk sharing

Status

Limited: Only under


Completely wound
catastrophic scenarios where down over 5 years
losses on a pool of mortgages
exceeds 10%

10% first-loss piece is sold


to private entities

Crapo-Johnson Bill

Unclear: reforms the FHA/VA


but maintains explicit
government guarantee of all
FHA/VA insured loans

Not addressed yet.


Might add the GSE
portion in coming
months

None as of now but may


resemble Corker-Warner
when the GSE portion is
included

Corker-Warner is under
committee discussion but
not yet put to vote. Either
one of these may become
the front runner from the
Senate side but both will
likely have private capital in
the first loss place with
several mechanisms for
risk sharing

The PATH Act

Very limited: dissolves the


GSEs completely and reduces
the scope of the FHA/VA
guarantee

Placed into receivership


and completely
liquidated within 5
years

Initially, there will be a 10%


risk-sharing program on
new GSE and FHA
business, although private
market securitization is
intended eventually to
replace the GSEs

Delaney-Carney-Himes
Proposal

Limited: Ginnie Mae is required GSEs will be slowly


wound down and
to provide an explicit
government guarantee once eventually converted
the 5% risk slice is eroded or into private reinsurers
with limited capacities
when one of the private
to take on mortgage
monoline insurers defaults
credit risk

5% first-loss piece on each


new Ginnie Mae
securitization, as well as a
10% pro -rata risk slice on
the top 95% of each Ginnie
Mae securitization

The Path Act seems to be


the clear front-runner on
the House side. The final
housing finance reform, if it
happens, could be a
compromise between the
PATH Act and whatever
comes out of the Senate

Source: House of Representatives, Senate bills, Barclays Research

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The Corker-Warner bill comes closest to our goals


We believe that the Housing Finance Reform and Taxpayer Protection Act (aka the
Corker-Warner bill to replace/wind down the GSEs) and the FHA Solvency Act of 2013
(aka the Crapo-Johnson Bill to reform the FHA and shore up the Mutual Mortgage
Insurance Fund) proposed in the Senate come closest on the three major policy goals
we outlined above. The Corker-Warner bill protects the taxpayer by requiring a 10%
privately held first-loss piece. It also establishes a separate Mortgage Access Fund that
would be responsible for providing affordable housing to low and moderate income
borrowers, so that these responsibilities would not conflict with the objective of the
GSEs (or their proposed replacements) to maintain a liquid and healthy US mortgage
market. Together with the reformed FHA, as envisioned under the Crapo-Johnson Bill,
the new GSE entities would also provide a countercyclical government backstop to
mortgage credit, though at a reasonably high guarantee fee.
The Corker-Warner bill aims to create a new, privately capitalized securitization
platform to replace Fannie Mae and Freddie Mac (Figure 12). It would also continue to
wind down the existing retained portfolios of the GSEs, reduce conforming loan limits,
and transfer some mortgage credit risk to private entities.
The new securitization platform, the Federal Mortgage Insurance Corporation (FMIC),
would provide explicit government guarantees on conforming loans, charging a
guarantee fee to originators who sell the loans into the platform. These insurance
premiums would then be placed into a mortgage insurance fund (MIF) that would be
used to cover losses on the mortgage pools that exceed the risk-transferred thresholds.
FMIC would also be given other regulatory responsibilities, including setting standards
for eligible loans, creating a standard securitization platform, and approving credit risksharing programs.

Insures against catastrophic risk


One of the key features of the Corker-Warner legislation is the presence of an explicit
government backstop in the event that private guarantors are unable to cover all losses.
In this case, FMIC essentially provides a full faith and credit guarantee of the principal
and interest of the FMIC security, in a similar fashion that GNMA does.

Guarantee fees fund a mortgage insurance fund


In exchange for providing a government guarantee on the security, FMIC is authorized
to charge securitizers a guarantee fee to defray the cost to taxpayers of providing such
insurance and the costs of any operating expenses. FMIC has the discretion to modify
these fees to keep its reserves in excess of 2.5% of all insurance-in-force (ie, guarantee
fees could be increased during times of housing market or economic weakness). That
said, FMIC may not charge different fees for different lenders or loans from different
geographic areas. In the event that the mortgage insurance fund is unable to satisfy its
guarantee obligations through its mortgage guarantee fund, the bill establishes
authority for FMIC to borrow up to $100bn from the US Treasury.

Proposal puts private capital in the first-loss position


One of the key tenets of the Corker-Warner bill is that it requires private investors to be
in a first-loss position: the credit piece borne by private investors must be at least 10%
of the principal amount. Furthermore, as a guideline, the first-loss piece should be large
enough to cover losses associated with previous periods of economic and home price
weakness experienced during the past 100 years.
The bill requires the development and implementation of various risk-sharing mechanisms
within five years of the date of enactment. Specifically, it calls for examining seniorsubordinated structures, credit-linked notes, and the use of regulated insurers to absorb
any expected losses. FMIC will be required to submit a report annually to the House
Financial Services Committee and the Senate Banking Committee during the first five years
after enactment on the benefits and drawbacks of each credit-sharing mechanism.

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The housing finance system proposed by Senators Corker and Warner resembles
characteristics of the GNMA model; specifically, the explicit government backstop, as
well as the establishment of a reserve fund to cover future mortgage losses as
determined on an actuarial basis. However, the introduction of a risk-transfer
mechanism should further alleviate the risk to the government and also provides a
method by which market forces can influence credit underwriting standards, as well as
provide signals to government regulators on impending defaults.
Although we believe that the housing finance system ultimately adopted by
policymakers will strongly resemble the template established by the Corker-Warner bill,
the timeframe required for the current system to evolve into this model is likely to be
lengthy. Legislative and implementation issues will likely weigh on progress that can be
achieved on shifting to this type of mortgage finance system in the near term.

Part IV: Raising private capital


The key challenge in any proposal to replace the GSEs with a private/public-private
alternative is going to be how much new capital needs to be raised. Currently, the GSEs
back about $4trn in mortgages (down slightly from $4.8trn at the end of 2009).
Assuming that this portfolio stays at $4-4.5trn over the coming years and there is a
10% private ownership first-loss piece, as proposed by the Corker-Warner bill, this
would translate into $400-450bn of new capital (if the government winds down the
GSEs and keeps the excess cash flows from the GSEs).

How does $450bn compare in the context of mortgage capital?


We believe that the amount of new capital required is much larger than what can be
expected of the private market in the short term and will likely determine the pace of
transition. The initial reaction to selling mortgage credit owned by the GSEs has been
positive and deals have been oversubscribed. But so far, GSEs have only sold about
0.5% of the total that would be needed under a Corker-Warner-type bill requiring 10%
private capital. We doubt that the market would be able to adapt to a scale of that
magnitude in a hurry. So the question is: from where would the demand for mortgage
credit risk come?

Can existing non-agency holders provide this capital?


One source of potential demand would be investors in legacy non-agency MBS. There is
currently about $850bn (face value) outstanding in the non-agency market. This is paying
down at the rate of $60-70bn annually. Given strong mortgage credit expertise among
many of these investors, some of the pay-downs they are receiving would likely be
reinvested in these securities. There could also be additional interest from money
FIGURE 12
Illustration of the Corker-Warner housing finance template
Pooling of
mortgages

Mortgage
loans

Lenders

FMIC Securitization
Platform

MBS Issuers

Insurance to
cover at least
10% losses

Reinsurance
fee

Government
Backstop

Private Guarantors
Market
Access
Fund

Mortgage
Insurance
Fund

Issue MBS,
pay P&I to
investors

MBS Investors

Pay P&I if private


guarantors fail

$100bn
conditional
borrowing
authority

US
Treasury

Source: Corker-Warner bill, Barclays Research

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managers and REIT-like entities. It could be argued that the bulk of this $850bn is nonAAA and, thus, that the current holders of these securities represent a large set of
investors interested in such credit profiles. However, that comparison would be wrong for
two reasons. First, many investors are legacy holders who bought these bonds when they
were AAA rated are not necessarily seeking to replace their existing positions with similar
non-AAA risk. Second, those who bought these securities in the past few years invested in
these securities at much higher yields than their levels today and the securities themselves
were less leveraged to risk than a 10% first-loss piece would be. So while we could expect
some demand from the hedge funds/money managers and insurance companies and,
over time, they could potentially supply a large part of the capital needed, we believe it is
unlikely they can take on the entire $450bn over a short period (3-5 years).

What about legacy non-AAA buyers in the private label securitization market?
Rather than look at current holders of non-agencies, how does the $450bn of new
capital needed compare if we look at legacy buyers of non-AAA assets? The total
outstanding private label non-AAA bonds peaked at just above $350bn in 2007 (Figure
13). That may look encouraging at first glance, but about $180bn of that was owned by
CDOs, which obfuscated their true risk and likely overstates the true amount that could
be sold in this market. Again, this hints at the fact that the securitized market is unlikely
to provide anywhere close to $450bn of capital, except over a very long horizon.

How long will it take to fill the gap?


Another possible source of new capital is the equity market. Figure 14 shows equity
raises (IPOs, additional raises and rights issues) by financial companies (excluding nonmortgage REITS and closed-end-funds) over time. There has been a surge in equity
raises during and since the crisis. Banks raised about $220bn of new capital to shore up
balance sheets that were hit hard by the credit crisis, as well as in response to higher
capital standards. Still, the pace has, on average, been about $35bn per year for banks
and about twice that when combining other financials such as insurance companies or
mortgage REITs. Even assuming that capital raises continue at such a pace and most of
it gets allocated to absorbing mortgage credit risk, it would take at least 5-10 years to
get to $450bn in capital. And this is by no means assured. For example, if the $450bn is
raised as equity capital, which demands a higher rate of return, mortgage rates would
be significantly higher (100-150bp, assuming 10-15% required return on capital),
something that would be politically unacceptable.
We came to a similar conclusion in US housing finance: No silver bullet, where we
estimated that it would require 15-20 years for all government guaranteed mortgages
to be funded on private sector balance sheets. While housing has improved greatly
since that piece, 10-15 years will probably still be needed for a smooth transition.
We conclude that no single source will be able to provide $400-450bn of capital to
transfer credit risk on close to $4.5trn of mortgages over a short time span of a few
years. As such, if the capital requirement is 10%, new capital will have to be sought
from other possible sources and over an extended time. That begs another question: is
10% capital the right size, or are there better ways to size the first-loss piece?

Is 10% the right size? Are there better options for sizing the first-loss piece?
A bigger capital requirement provides greater protection to the taxpayer but also makes
capital raises more unmanageable. As we have shown in the previous section, 10%
capital to support the $4.5trn or so of mortgages backed by the GSEs is a fairly large
number in the context of the likely demand for such capital. So it begs the question of
whether there are better options to size this piece.

Does a single number engender adverse selection?


By specifying a single number such as 10%, the FMIC risks adverse selection on its
portfolio. For clean collateral, where losses in excess of 10% are very unlikely, the value of
the FMIC wrap may be minuscule. While the pricing of a FMIC wrap is still unclear, it
would be hard to justify paying a significant amount for this wrap, and such cleaner
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FIGURE 14
Financial equity raises (excluding non-mortgage REITs and
CEFs)

FIGURE 13
Total outstanding private label below AAA bonds over
time, $bn
Non AAA outstanding (bn)

$bn
140

400

120

350

100

300

80

250

60

200

40

150

20

100

Source:

1/07

1/08

1/09

1/10

Bloomberg, Barclays Research

1/11

1/12

1/13

1/14

Banks

Insurance

Diversified Fin

Mortgage Reit

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2000

0
1/06

2001

50

Others

Source: Bloomberg, Barclays Research

collateral would likely be placed by the market without an FMIC wrap or find better bid
from bank portfolios. The collateral that would gravitate towards an FMIC guarantee may
in fact be adversely selected and/or barbelled so that in the base case scenario, it
generates outsized yields for the bottom 10% piece, but in a somewhat unlikely scenario,
it could breach the 10% equity buffer and possibly pass losses to the FMIC. In general, any
constant number on the first-loss piece will face this problem to varying degrees.

Variable sizing may lead to uncertainty and illiquidity


The alternative to a fixed number is to use some form of sliding scale based on the risk in
the loans. However, this introduces further subjectivity and raises the question of how this
scale will be determined (models, rating agencies) and whether and how it would be
adjusted over time. It may also create problems with a future TBA-type market that trades
the wrapped top pieces. With a fixed slice, cash flows on the top-wrapped pieces across
collateral are more comparable. If the size of the top-wrapped piece varies by collateral
and/or over time, the TBA pools would not be comparable in terms of cash flows.

Political realities could drive this number


Economics apart, political realities are likely to drive this number. At the moment, there
is still a fair amount of opposition to any taxpayer support of the housing finance
system in Congress, especially among the Tea Party Republicans in the House. As a
result, we believe that any compromise bill would have to include a high (say, 10%)
private first-loss piece with as little subjectivity as possible.

Credit risk transfer deals are an efficient way to raise 10% fixed capital
We do not believe that the final legislation will require the first-loss piece to be fully equity
funded. In that case, the market is likely to demand different returns on the 10% piece,
depending on the risk of the pool of loans it backs. One efficient way to raise such capital
is likely to be in a fairly disaggregate form, which allows the market to price the risk on the
10% private piece appropriately. The 10% would be funded with the right combination of
equity and debt for that particular type of collateral risk. This would hint at some benefits
to a credit risk transfer deal-type structure, something we examine in the next section.

What forms can private participation take?


The transfer of credit risk under the new model could use various structures to sell the
credit risk.

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STACR/CAS5-like bonds or credit-linked notes are our preferred option


This structure relies on a securitization-like structure that sells the risk on a bottom
first-loss piece to the market and retains the top portion of the risk at the GSEs. It can
easily be adapted to do this in the FMIC structure proposed under the Corker-Warner
bill by letting FMIC take on the role of Fannie/Freddie in the STACR/CAS deals. We
discuss the structure in detail in Introduction to GSE risk transfer deals and show the
sources and uses of cash flows in brief in Figure 15. This structure requires the FMIC
first to issue a temporary guarantee on the entire mortgage and then sell the bottom
piece to the private markets. The advantages are that the bottom loss piece is fully
funded and the structure maintains the current TBA market and fully collateralizes the
credit support used to absorb losses on the mortgage pool.
Such a structure also allows originators to continue to provide mortgages in more or less
the same way they have for the GSEs. Currently, they have a good sense of what they can
get paid for a particular GSE loan at the time of origination. The STACR/CAS-like
solution first warehouses the risk at the FMIC and then sells it in the market. The FMIC will
have enough scale across all originators to ensure that this warehousing period is fairly
short and does not raise the overall risk it takes on. Furthermore, the FMIC will be entitled
to the entire coupon on the loans for the warehousing period, which should compensate
it adequately for any risk. A maximum limit can be imposed on the warehousing capacity
to limit risk for the FMIC. Another alternative would be to create a separately capitalized
utility to warehouse this risk. We think such a warehousing facility at FMIC is essential to
ensure that smaller originators can compete on a more equal footing with larger ones.

FIGURE 15
Cash flows and losses, sources and allocation for the STACR 2013-DN1 deal

Where it comes from


Paid by Freddie Mac

Paid by Freddie Mac

Sum of all full or partial voluntary


prepays, removals other than credit events
and net adjustments for modifications

Credit Events times (1- Severity)


plus any Writeup amounts

Net Credit Events times Severity


(adjusted for rep and warranty
repurchases and settlements)

Where it goes

Interest

Scheduled
Principal

Unscheduled
Principal

Calculated
Recovery

Writedowns

Paid to M-1, M-2 on balance


after principal and loss allocations

Pro-rata allocation between the


senior and subordinate reference tranches
If triggers pass,
allocated pro-rata to seniors/subs
If triggers fail,
allocated sequentially to seniors/subs
Allocated sequentially to senior/subs

Allocated reverse sequentially to subs


then seniors

Source: Barclays Research

STACR and CAS are Freddie Macs and Fannie Maes credit risk transfer deals. For details on how these
structures work, please see Introduction to GSE risk transfer deals.

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Senior-sub structure can also work


A senior-sub structure is also workable where the FMIC guarantees the top 90% piece
for a guarantee fee and originators/aggregators sell/buy guarantees on the bottom
piece separately. While it would be possible to create a liquid market for the top 90%
(similar to the existing agency TBA market), this structure could lower overall
competition in the origination business.
A senior and sub piece sold separately by an originator means that the originator has to
warehouse the credit risk until it can sell it or aggregate enough scale to get reasonable
execution on the credit piece. For example, an originator with $1bn of annual origination
volumes originates about $83mn in mortgages and creates an $8.3mn credit piece in a
month. This may not give it enough scale to sell the credit deal on a monthly basis and it
may need to aggregate 3-6 months of originations before it can sell the credit piece
without paying a size penalty. This would mean that the originator would not have
certainty on its loan pricing for about 3-6 months. This would put it at a disadvantage to
larger originators, which could do this monthly or at even shorter periods. As such, while
the senior sub structure is workable, we still prefer the credit risk transfer structure
because it allows more competition in the mortgage market.

Pool policies from mortgage insurers lead to counterparty risk for FMIC
This structure is similar to how pools of mortgages were insured prior to 2008, whereby
insurers are exposed to a pre-specified loss amount on a pool of mortgages. This form
of insurance may result in some counterparty credit risk. The STACR/CAS deals provide
the GSEs with cash equal to the face value of the first-loss piece sold. This can be set
aside to provide the GSEs with an actual cash capital cushion in case losses exceed the
threshold that the GSEs have chosen. In the insurance/guarantee transaction, the
insurer does not have to pay this cash up front but only if losses exceed a certain level.
While the Corker-Warner bill requires guarantors to hold capital equal to at least 10% of
the guaranteed balance, this works as a safeguard only if the guarantors only business
is to provide insurance on these pools. If it is involved in other lines of business, unless
the capital is held in a separate account for the benefit of the enterprises or their
successor, the taxpayer still takes on some counterparty credit risk. For example, if in
certain extreme situations the losses on the guarantors other lines of business exceed
the capital set aside for those lines, there is some risk that the insurers will have to pay
out using the capital otherwise required to be held to cover mortgage losses. This could
lead to a situation where some part of the 10% is not covered and the taxpayer is
exposed to the risk. Stronger oversight and regulations separating the capital held for
guaranteeing MBS could mitigate this risk, but would not eliminate it completely.
The pool guarantee structures would not be as transparent in pricing as the
STACR/CAS deals since there would be no secondary market to provide liquidity/
pricing information on an ongoing basis. The secondary market would provide more
immediate feedback to guarantee fee pricing than a guarantee transaction could. A fully
functional secondary market in these credit tranches also provides useful information
that could allow a fully private market to price credit risk in a more transparent manner
and help foster a fully private market. This solution also requires the FMIC to warehouse
the risk first before selling it; due to the counterparty credit risk, we believe that the
credit risk tranching solution is a superior method of selling risk than this.

Monoline guarantors as providers of first loss


A way to alleviate the counterparty credit risk that the FMIC takes on in the mortgage
insurance structure is to build on the senior sub structure. As in the latter the top piece
is directly guaranteed by the FMIC. The bottom piece is wrapped by a monoline
guarantor and then sold to investors or held by originators. This allows the FMIC to be
better protected from counterparty credit risk but shifts it to the holder of the wrapped
bottom 10% slice. If the bottom 10% is sold in wrapped form in a senior sub structure,
the buyer now takes on this credit risk and would charge a higher spread. Overall, this
structure has the same drawbacks as the senior sub structure in terms of warehousing
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but could provide better execution by separating the funding of the bottom 10% piece
from the credit risk of the piece. However, the trade-off between funding/credit can
also be achieved by tranching the 10% piece into a higher piece that is mostly credit
risk free and a bottom locked-out piece that takes on most of the credit risk. As such,
we would expect this to be a part of the solution if a senior sub market does crop up in
response to a Corker-Warner type legislation.

A wide mix of the structures is likely required


Overall, although we favor the credit-linked structure, given the size of credit risk
transfer required over the long run, it might be preferable to have multiple exit options,
including through pool/bond guarantors. We believe that it might be useful to allow the
market to evolve using all these possible avenues to sell credit risk. This would allow
investors with various risk profiles and return objectives to come up with the required
capital and potentially create a system that is not reliant on any single source.

Part V: Interplay of reform legislation with QM rules


The evolution of housing finance over the longer term will be driven not only by the
reform legislation, but also by its interplay with existing rules. The most prominent of
these are the Qualified Mortgage (QM) rules that went into effect on January 10, 2014.
These impose additional costs on originating non-QM loans by creating potential
liability for the lenders or the assignee/eventual owners of these mortgages. Qualified
Residential Mortgage (QRM) rules, which are still in the proposal stage, could also be
finalized this year. While the current proposal seems to point to fairly benign rules and
may not affect any significant part of the mortgage market, they could, if adopted in a
form that affects a wider swathe of mortgages, reduce the flexibility that originators
have in securitizing these deals by imposing a risk retention requirement.

FIGURE 16
Additional liabilities in a QM world
Low Priced QM
Level of Protection

Safe harbor

Needs to prove that the


What does the
borrower need to prove loan is not a QM loan
based on information
to establish that the
available to the lender
loan does not meet
at the time the loan
ATR?*
was made, to remove
ATR presumption and
then contest that loan
did not meet ATR
requirements.
Maximum liability if
loan does not meet
ATR

High Priced QM

Non QM

Rebuttable
presumption

No presumption

Needs to show that


borrower would not
have enough residual
income after paying
mortgage and other
debts to meet living
expenses based on
information available to
the lender at the time
the loan was made.

No presumption of
compliance, so lender
may need to show that
the loan satisfies ATR
requirements. However,
this could be fairly
subjective.

Actual damages (extent unspecified)


All finance charges paid by borrower (up to a maximum of three years)
Statutory damages in individual or class actions with some limitations
($400- $4000)

Court costs and attorney fees (could be fairly high for long drawn out
legal battles)
Ensure minimum errors
What can
lenders/assignees do in the underwriting
to prevent a successful process
ATR claim?

Conduct a residual
income assessment
prior to origination to
ensure that they have
documented evidence
of the borrowers
residual income in
relation to their living
expenses

Have well-established
underwriting guidelines
that meet the broad
ATR specifications.
Modify/use short sales
to prevent an actual
foreclosure (so it
cannot be contested).

Note: *Ability to Repay. Source: CFPB, Barclays Research

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Do QM/ATR rules constrain mortgage credit availability?


With mortgage credit still at historically tight levels and the housing market continuing to
normalize, we see scope for expansion in mortgage credit over the coming years, even with
the QM rules. That said, the ATR/QM requirements imposed by the Dodd-Frank Act will
make it harder for credit to expand to pre-crisis levels. In particular, the rules will affect
loans with interest only/negative amortization or balloon features, greater than 43 debt-toincome ratio (DTI), high points and fees or limited documentation. At present, the majority
of new originations have a GSE/FHA guarantee and receive temporary QM status. These
loans comply with most parts of QM, but about 15% of current GSE production have DTIs
exceeding 43% and would not be QM under the general rules. However, for the next seven
years, even these loans are covered by a GSE-specific exemption, and we do not expect the
rules to have any immediate effect on credit availability.
If the entity that succeeds the GSEs (such as the FMIC) does not receive the same
temporary QM treatment, we believe that the effect on current production of mortgages
will be manageable, although the 15% of mortgage originations that would be non-QM
under the general definitions would likely see additional ATR liability-related costs.

Additional costs on loans typically limited to foreclosures


As Figure 16 shows, non-QM loans have additional litigation risk. Borrowers faced with
a foreclosure can attempt to show that the loan was made without consideration to
their ability to repay the loan. However, a non-QM loan does not automatically mean a
loan that does not meet the ATR standards required by the law. Still, if the borrower can
prove this to be the case, he or she can receive up to three years of finance charges
(mostly interest payments) as statutory damages, in addition to legal costs/lawyer fees
and possible actual damages (which are somewhat open ended). These could add
significant uncertainty to the costs that lenders have to bear for delinquent/defaulting
loans. They are borne by the eventual assignee of the mortgage at the time of the
litigation, imposing additional costs on securitizing these loans.

ATR costs scale with defaults, limiting credit for medium to worse credit
borrowers
Since these costs scale with the absolute level of delinquencies/defaults (borrowers are
unlikely to claim this while continuing to make payments), we believe that this will have
the biggest effect on medium-to-worse credit quality borrowers. For cleaner-credit
borrowers, the likelihood of defaults will be very low; hence, the incremental ATR costs
will also be minimal. However, as default likelihood increases, these ATR costs also go
up, likely making it costlier to originate these loans.
For example, Figure 17 shows the incremental costs of originating IO loans (non-QM)
vs non-IO loans (which are QM). The total cost is made up of two parts. The first is the
credit cost associated with the higher expected defaults/losses on IO loans. To this we
must add the likely cost of ATR claims (equal to the expected ATR loss x total defaults x
likely rate of successful claims) to arrive at a fully loaded breakeven spread at which the
lender should be agnostic between an IO/non-IO loan.
Overall, we find that the credit cost of originating clean IOs and the ATR cost are close to 0
in our base case. In a severe stress scenario, the credit cost is 35-40bp for clean loans, with
an additional 10-12bp of ATR costs. As we go to worse collateral (lower FICO/higher LTV),
the credit cost increases to 80-120bp and the incremental ATR cost is 30-40bp.

Higher rates could disproportionately affect weaker credit borrowers


For cleaner credit loans, the additional cost of originating non-QM loans will remain
small and will not affect the availability of credit to such borrowers. However, as rates
rise, all else equal, the DTIs of new originations should trend higher and increase the
demand for more affordable non-QM IO loans. As such, we believe that while the
availability of this credit for cleaner credit borrowers will remain, the rules will reduce
the availability of this credit on weaker credit borrowers since originators will likely
charge an extra 50-100bp for these loans.
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FIGURE 17
Likely breakeven spread for IO/non-IO

Difference in Loss IO vs Non IO (ex advances)


assuming 0% ATR Claims

2000-2002 Perf. (Base Case)

2006 Perf. (Sev. Stress Case)

LTV Buckets

700-740 FICO

>740 FICO

700-740 FICO

>740 FICO

70-80

0.1%

0.0%

3.5%

2.3%
1.1%

60-70

0.0%

0.0%

2.7%

Difference in Loss IO vs Non IO (ex advances)


assuming 50% ATR Claims

70-80

0.1%

0.1%

4.8%

3.1%

60-70

0.0%

0.0%

3.5%

1.5%

Breakeven Spread IO vs no IO 0% successful


QM Claims (bp)

70-80

118

78

60-70

89

37

Breakeven Spread IO vs non IO 50% successful


QM Claims (bp)

70-80

161

103

116

48

60-70

Note: For owner occupied jumbo loans. Lifetime cumulative defaults are extrapolated from current numbers. For the stress case, we assume that forward
defaults are at about 75% of the pace of what we have seen, given some burnout. Similarly, we assume that forward severities ex-advances are about 75% of
severities seen to date. Source: Barclays Research

QRM unlikely to matter, given the 10% private ownership


Although all closed-end residential mortgage loans need to meet the QM requirements, the
proposed QRM rules apply only to mortgages that are eventually securitized. The QRM rules
as currently proposed would mimic the QM requirements and, as such, any loan that meets
the QM criteria would also meet the QRM criteria. Loans that do not meet the QM criteria
would also fail to be a QRM, and any securitization on such a loan would trigger riskretention requirements (see Effect of revised risk retention rules on securitized products, 30
August 2013 for additional details). However, if the new legislation requires more than a 5%
first-loss piece with private ownership, that should satisfy the risk retention requirements
and the effect of the QRM rules should be minimal.

Credit availability will also be driven by various implementation issues


Away from the housing reform legislation and QM rules, the all-in cost of mortgages
would also depend on various other implementation issues. While there are many such
nuances, we focus on two.

TBA market transition


The current agency TBA market is one of the most liquid fixed income markets in the
world, as reflected in lower mortgage costs. The transition of the TBA market or the
creation of a new one would have mortgage rate implications. A smooth transition,
whereby the future TBA market or its replacements retain the high liquidity, would keep
mortgage costs lower. It would require selling the bottom piece in a way that does not
affect the liquidity of this top government guaranteed piece. Given that the bottom
pieces could be of various sizes, it would help if the eventual solution can effectively
treat the private-first loss piece as a black box and ensure a consistent cash flow
structure for the senior piece.

Control of loss mitigation and servicing


Under the current setup, GSEs retain control on the entire servicing and loss mitigation
issues. This allows them to protect themselves from losses and implement other policy
goals. However, if the plan is to sell the 10% bottom piece, this responsibility will have
to be devolved to someone lower down in the capital structure. In the absence of this
control over the loss mitigation process (say, because of policy goals), investors in the
first-loss piece will not be in a position to mitigate these losses and, as a result, will price
the bottom piece to somewhat worse assumptions.
From our standpoint, the first-loss holder should be given control of the loss mitigation
and servicing responsibilities. The various servicer settlements and the rules following
those should be enough to prevent any abuses of the system by servicers in general and
protect borrowers from mistreatment in most cases. The FMIC could retain some
mechanism to wrest back this control failing certain loss or delinquency triggers.
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Part VI: Implications on the availability and cost of


mortgage credit
It is possible that on a contentious issue such as housing reform, new legislations
emerge that are much different in form and character from the existing ones. That said,
we would argue that two scenarios are most likely several years from now.

Status quo: Given the political gridlock in Washington DC, impending elections,
complexity of the housing finance reform, transition and complications around the
GSE junior preferred issue, housing finance legislation may take several years to
become law. And the longer it takes to pass a bill, the greater the likelihood that
some version of the status quo will prevail. But, assuming the GSEs continue with
their current risk transfer initiatives, even the status quo should get the market to a
situation somewhat similar to the one envisioned by the Corker-Warner bill.
Admittedly, the level of private sector involvement should be lower than if
legislation similar to Corker-Warner is passed. But unless housing finance regulators
completely reverse course, a progression of the status quo should still lead to
improved taxpayer protection from current levels.

Corker-Warner style legislation goes through: Even if a 10% first-loss piece has to
be sold for each type of collateral, FMIC could cut up the piece into safer and riskier
bonds (as the STACR/CAS deals do with the M1 bonds, which are rated as
investment grade, and M2 bonds, which are unrated). Under such a system, the
bottom 10% would require different yields based on the underlying risk of the
mortgages, with lower risk cohorts selling at a lower required yield than higher risk
cohorts. As such, even with a 10% capital requirement, we would expect this
variable pricing to make the FMIC structure somewhat competitive with banks.
Under both scenarios, there would be three different possible exits for an originator: risk
transfer, bank portfolio bid and private securitization. Below, we compare the execution
of these outlets in an environment where a Corker-Warner-like bill (or significant GSE
risk shedding deals) has been in force for five years. The analysis is stylized but
hopefully gives a flavour of what the implications would be for the availability and cost
of mortgage credit.

Comparing execution for different outlets


We can measure the effect of all these changes on the housing finance system as a
combination of the credit availability and cost of credit in the mortgage finance system.
To gauge these differences, we measure the likely effect on mortgage rates for various
cohorts. We split the mortgage universe into six stylized risk buckets across FICO (high
>700, med 620-700 and low <620) and CLTVs (low <= 80% and high > 80%). We also
assume that economic conditions are relatively normal and that the QM/QRM guidelines
do not go through any drastic changes. These are purely illustrative and the effect on the
mortgage market will obviously be much more nuanced. To illustrate the range on
outcomes, we compute the likely mortgage rate for four possible execution scenarios.
1.

Bank portfolio bid: Banks are always a prominent source of mortgage credit. To
calculate the required rate on mortgages for a bank bid, we assume that banks hold
the extreme case expected loss as capital and that they are required to earn 15% ROE
on this. We also assume that they want to earn a spread that compensates them for
the expected case loss over 4 years and add 100bp to the rate to account for servicing
costs and compensation for broker/other upfront origination costs. On the rest of the
mortgage, we assume they are fine with earning the yield equal to the current coupon
mortgage rate (as a proxy for funding and convexity costs). So the mortgage rate
shown for bank bid equals:
(extreme loss x 15%)+ ((1-extreme loss) x CC mortgage rate) + (base case loss/4) +
100bp

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2.

Corker-Warner (or risk transfer) with tranching: If a Corker-Warner like bill is


passed, the all-in mortgage rate would have to account for the required rate of
return on the first-loss piece, as well as the guarantee fee charged by the FMIC. We
assume that the guarantee fee charged by the FMIC on the top 90% is 15bp. This
could be higher for worse collateral. Assuming a higher guarantee fee for the
worse collateral should not change the overall economics much. We further
assume that the bottom 10% can be sold with a fair amount of flexibility on
tranching. This assumes that a structure similar to the credit risk-sharing deals is
used on fairly disaggregate collateral. As a result, the bottom 10% should price
with different yields based on the difference in expected losses on the underlying
collateral. We compute the required mortgage rate by adding up the FMIC
guarantee fee (assumed to be 15bp), the contribution of the required yield, a
compensation for base case loss, servicing/origination costs and the cost of
funding and convexity risk on the top 90% piece. So the total WAC is equal to:
FMIC gfee x 90% + (10% x required yield) + (90% x CC mortgage rate) + (base case
loss/4) + 100bp

Furthermore, we compute the variable required yield as the weighted average of 15%
on the true equity component and 5% on the rest of the first loss piece, which will trade
more like debt. If we assume that the extreme case loss is the true equity required for
the various cohorts, the required yield is:
((min(10%,extreme loss)) x 15% + (10% min(10%,extreme loss))*5%)/10%
3. Corker-Warner (or risk transfer) with minimal tranching: We assume that the bottom
10% can be sold only with minimal tranching, for example, with 5% held as equity capital
requiring 15% yield and the other 5% in debt form at 5% yield. We assume the required
yield on the bottom 10% to be about 10% (average of 5% equity at 15% yield and 5%
debt at 5% yield). This would be close to what a pool/bond guarantor model would entail,
assuming that the pool/bond guarantor was forced to hold 10% capital with 5% in equity
form and another 5% in debt form. It is possible that given the uncertainty about the
collateral that would back such pool/bond guarantees and the possible adverse selection
in these, equity/debt holders could demand higher rates. If this happened, the execution
for such guarantees would suffer. As above, we calculate the mortgage rate assuming
that the required yield is equal to 10%:
FMIC gfee x 90% + (10% x required yield) + (90% x CC mortgage rate) + (base case
loss/4) + 100bp
4.

Private Label Securitization: Execution in this market for the bottom 10% should be
very close to the Corker-Warner with tranching scenario since the bottom 10%
slice will price in a similar way. For the top 90% piece, execution should be worse
than the Corker-Warner with tranching scenario because the credit and liquidity
costs likely charged by the private market would be higher than the FMIC guarantee
fees (we assume 15bp). If the FMIC guarantee fees are excessively high, then it is
possible to imagine a scenario where private securitization is better than a CorkerWarner exit. However, Corker-Warner does envision that after an initial transition
period the FMIC fund will be dissolved. In such an outcome, the FMIC guarantee fees
could be raised slowly until the private market becomes competitive on the top 90%
piece. In the medium term, however, if a Corker-Warner-like solution is available, we
believe that private securitization will exist but be restricted to non-conforming and
non-QM collateral.

Cleanest credit borrowers least affected; weaker-credit spreads could widen


Figure 18 shows the results of these computations across the execution scenarios. For the
cleanest collateral, bank execution is likely to be better than a Corker-Warner-style
execution, assuming that banks are allowed to hold capital based on the expected losses
on the underlying mortgages. This will likely be true for the largest banks (which make up
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FIGURE 18
Bank portfolio vs Corker-Warner execution
% GSE/Non Agency
Originations

Average Expected
Losses For QM Loans
across Scenarios

Approximate WACs
Corker
Warner
with 10%
yield on
bottom
10%

Corker
Warner
with
variable
yield on
bottom
10%

Increase
from
current
WACs(bp)

20042007

2013

Base

Extreme
Stress

Current

Bank
Portfolio
@15%
equity yield

High FICO Low LTV

54%

78%

4.7

4.7

5.3

4.9

0-20

High FICO High LTV

7%

6%

5.5

5.7

5.6

5.9

10-40

Med FICO Low LTV

19%

10%

5.0

5.4

5.5

5.6

40-60

Med FICO High LTV

7%

1%

16

6.3

7.6

6.5

7.0

20-130

Low FICO Low LTV

9%

4%

5.1

5.9

5.6

5.9

50-80

Low FICO High LTV

4%

0%

21

6.8

9.4

7.4

7.9

60-260

2004-2007 Mix

1.5

5.2

5.1

5.4

5.5

5.5

30-40

2013 Mix

0.7

2.9

4.8

4.9

5.3

5.1

10-50

Credit Bucket

Note: We assume that banks are required to hold capital equal to losses expected in an extreme stress scenario. We further assume that all private participants
require full compensation for base case losses for each collateral type over a 4 year assumed duration. We require bank capital to earn 15% yields and CorkerWarner capital to earn 10% yields. We assume that FMIC charges a flat 15 bp gfee across all collateral types. We use the following aggregations: Low
LTV(<=80%), High LTV(>80%), High FICO (> 700), Med FICO(620-700), Low FICO(<620). Source: Barclays Research

more than 55% of originations), which will be able to use model-based capital charges on
these loans. For the cleanest loans, the combination of the 10% first-loss piece (even
assuming that a lower weighted average yield is required on this piece) and the FMIC
guarantee fee will result in a loan that is more expensive to make than the bank portfolio
bid. In the best case execution scenario for high-FICO low-LTV borrowers, there could be
very little change in overall rates. However, banks could widen pricing to match the best
Corker-Warner execution or even more if raising the large amount of capital widens the
required ROE from the 15% that we have assumed. As such, we expect banks and CorkerWarner structures to be competitive in the cleaner cohort, which represents the largest
fraction of the overall mortgage origination universe.
As we move to lower credit quality loans and the economic capital required to be held by
banks approaches 10%, the Corker-Warner execution becomes better than the bank bid.
This is again indicative of one of the problems with the fixed 10% first-loss piece noted
earlier. Even with tranching, the fixed first-loss piece and the FMIC guarantee are subject
to some adverse selection. If we increase the FMIC guarantee fee, it could prevent some of
this, but that would come at a higher mortgage rate on these borrowers. Overall, we
would expect the WACs on these borrowers to increase 50-100bp, possibly even more if
FMIC guarantee fees are made to scale with the credit risk of the loans. Unless the MI
premiums charged by the FHA are increased to match these costs, there could be an even
bigger shift into FHA lending, especially for weaker-credit borrowers.

We expect credit conditions to loosen incrementally


Although the cost of credit will increase because of the returns required on the private
capital, we believe that a higher share of worse-credit loans will be made. For instance, the
share of medium/low FICO low LTV originations in 2013 non-FHA space was 1%,
compared with 11% in 2004-07. So, while the nominal WAC for these loans is low today
in the GSE world, these loans are not being made. However, we believe that over the
coming years, as the housing market normalizes and the recency effect on housing credit
decreases, there should be incremental loosening in credit standards. Over time, we
believe this will lead to a higher share of worse-credit mortgages being made, despite the
higher credit costs charged by private capital. If this process of credit normalization
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remains slow, we would also expect the pace of GSE reform to slow. We believe that
policymakers will remain concerned about the health of the housing market for the next
few years and, as such, will not allow a significant tightening of credit standards.

Appendix: Housing finance reform legislation


Below, we list some of the highest-profile legislative proposals:

Corker-Warner bill (Housing Finance Reform and Taxpayer Protection Act): The
proposal completely winds down Fannie Mae and Freddie Mac over five years,
transferring their functions to a new government entity called FMIC that provides
catastrophic loss protection on a pool of mortgages once credit losses exceed 10%.
Private entities, including bond insurers, investors, and mortgage insurance
companies, would incur the risk on the first 10% slice. Issuers/originators would
pay FMIC a guarantee fee in return for the government backstop, which would be
held in a reserve fund to be used to pay catastrophic claims. Loan limits would be
gradually reduced on the size of loans eligible for an FMIC guarantee.

Crapo-Johnson bill (The FHA Solvency Act of 2013): This bill is meant primarily to
stabilize and strengthen the existing FHA/VA infrastructure. The capital reserve
ratio for the Mutual Mortgage Insurance Fund would be increased to 3% from 2%
within 10 years. The Secretary of HUD would also be required to charge a minimum
annual insurance premium of at least 55bp and re-evaluate it every year to ensure
that the premiums paid by borrowers are sufficient to maintain the 3% capital
reserve ratio. The secretary is also given authority to terminate a lender's license to
originate FHA/VA loans on a national basis if it is unable to meet certain HUD
performance standards. The secretary is also required to revise the FHA's
underwriting standards as necessary to better define borrower credit risk.

Protecting American Taxpayers and Homeowners (PATH) Act: Under this


proposal, the GSEs would be placed into receivership and completely wound down
over five years, their guarantee fees would be reviewed each year to ensure that
adequate compensation is paid for the mortgage credit guarantee, and loan limits
would be reduced in high-cost areas. With respect to the FHA, down-payment
requirements would be raised from 3.5% to 5%, the FHA's loan-level insurance
coverage would gradually be reduced from 100% to 50%, and the FHA would be
required to charge a minimum annual premium on all loans and offer risk-based
pricing. A credit risk-sharing program would be established whereby at least 10% of
the credit risk on the GSEs' and the FHA's new business every year would be sold to
private investors. The bill would also provide regulatory relief for banks engaged in
originating mortgages, including by delaying implementation of Basel III rules for
two years, providing regulatory exemptions for mortgages meeting certain
qualifications, and repealing QRM requirements. Finally, a common platform would
be established (National Mortgage Market Utility) that would develop common
standards for the origination, servicing, pooling, and securitization of mortgages.

Delaney-Carney-Himes proposal: This envisions a public-private partnership


whereby a first-loss piece of 5% on each securitized mortgage pool is required to be
sold to private monoline insurance companies, with Ginnie Mae providing a
reinsurance guarantee on the remaining 95% of each pool. Private reinsurers would
contract with Ginnie Mae to share the reinsurance risk using market-based pricing,
with the private reinsurer absorbing at least a 10% pro rata share of the 95% top
slice. Ginnie Mae and the private reinsurer would receive the same terms and price
for the risk that is shared so that the reinsurance fee is dictated by market forces.
Fannie Mae and Freddie Mac would be slowly wound down and converted into one
of the several private monoline insurers and reinsurers providing protection on the
Ginnie Mae securities. The issued Ginnie Mae securities would be standardized so
that a liquid TBA market could develop.
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CHAPTER 6

Shifting inflation landscapes: Implications


for Japan and Europe
Sreekala Kochugovindan
+44 (0)20 7773 2234
sreekala.kochugovindan@
barclays.com
Anando Maitra
+44 (0)20 3134 0091
anando.maitra@barclays.com

Japanese inflation currently exceeds that of the euro area and the US, and the
economy appears to be on the verge of transitioning out of deflation for the
first time in 20 years. In contrast, Europe seems to be teetering on the edge of
the deflation cliff. We examine the relative impact of reflation and deflation on
financial markets, and the implication for regional asset allocation.

We compute the optimal allocations across different inflation regimes and find
that if Japan continues to transition out of deflation, the impact is relatively
clear and equities are likely to outperform fixed income. This in turn could
induce large asset allocation shifts by Japanese investors that would further
support the strategic case to be long Japanese equities.

For Europe, the story seems more nuanced. The implications for equity returns
would depend on whether the economy enters a phase of good or bad
deflation. Here we find that the investment cycle plays an important role in
determining how to allocate if we slip into deflation.

Introduction
It was not so long ago that investors worried that years of unconventional global policy
might lead to inflationary pressures that would later become difficult to control. Instead,
inflation has trended lower across many countries and investor focus has steadily shifted
toward the investment implications of disinflation and the threat of deflationary
pressures in Europe. In contrast, Japan appears to be on the verge of moving out of
deflation for the first time in almost 20 years. With the potential for continued divergence
between the two economies, we examine the relative impact of reflation and deflation on
financial markets. Is there an inflation sweet spot for investors? If so, what does this
imply for regional asset allocation? Our analysis suggests that if Japan transitions out of
deflation, there is likely to be a strong strategic case for reducing overweight positions in
fixed income in favour structural longs in Japanese stocks. For Europe, however, the
story may be more nuanced. If deflation were to become a reality, bonds would clearly
be supported, but the equity outlook would depend on whether or not Europe entered a
period of good or bad deflation.

Allocating across inflation regimes


We compare deflation-mired
Japanese assets with those of
countries with more normal
inflationary backdrops

To help underscore the importance of the inflation backdrop in investment decisions,


we begin by comparing regional asset performance over the past 20 years. Figures 1 to
3 compare Sharpe ratios of holding various assets across developed markets. We
contrast the performance of deflation-mired Japanese assets with those of countries
that experienced a relatively stable and positive inflationary backdrop such as the US,
UK and Germany. Across all countries, government bonds and curve trades
outperformed equities on a risk-adjusted basis. In the case of the US, UK and Germany,
this is to be expected, given the secular decline in global bond yields over the past 30
years, which has boosted fixed income returns and favoured curve steepeners.
In Japan, the special case of deflation has led investors to seek safety in government debt,
away from equities, which, as a consequence, have underperformed other developed
markets. The Sharpe ratio for Japanese equities is near zero, in comparison with the US
equity Sharpe of 0.4. Japan is also exceptional in that the risk-adjusted returns on the 2s5s
curve steepener is negative, and suggests a very different dynamic when policy rates are
bound at zero for prolonged periods. There is an asymmetry in the front end of the curve:
the 2y is biased to underperform during risk-off periods, when yields head lower, given the

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Barclays | Equity Gilt Study


zero bound. Thus, zero rates appear to favour flatteners at the front end of the curve.
Meanwhile, the 5s30s in Japan are biased to steepen as the 5y tends to move more given
that 2y yields are fixed close to zero.
The special case of deflation
and zero rates favours
flatteners at the front end of
the curve. The optimal
allocation to equities is just
half that of normal inflation
countries

To see how the performance translates into actual allocations, we examine the history of
optimal equity allocations since 2001 (Figure 4). The optimisation is conducted over a rolling
10-year sample and for simplicity, just two assets are considered: equities and sovereign
debt. The chart reiterates the message that a large overweight in Japanese government
bonds would have been optimal, given the underperformance of equities. The deflation
backdrop leaves the optimal equity allocation at 0-10%, while the UK and US allocations
were more than double those of Japan outside of the crisis periods. German equity
allocations fall in between Japan and the US and UK. One reason could be the greater relative
volatility of German equities during this period as a result of re-unification in the early 1990s,
and later the convergence of bond yields as the monetary union formed.
What should investors do when economies transition from one inflation regime to
another? If Abenomics is successful in reflating the economy, will Japanese investors
be induced to shift their allocations away from a fixed income bias toward equities,
and mirror the behaviour of US investors? Figures 5 and 6 suggest that they might.
The analysis provides a cross-country comparison of Sharpe ratios conditional upon

FIGURE 1
Japan: Sharpe ratios since 1994 validate aversion to equities

FIGURE 2
US: Equities fare better against a normal inflation backdrop

1.0

1.0

0.8

0.8
0.5

0.5

0.3

0.3

0.0

0.0

-0.3

-0.3

Credit : Ex Ret

Equity

Slope [5-30]

Slope [2-5]

Equity

Slope [5-30]

Slope [2-5]

Tsy

Tsy

-0.5

-0.5

Source: Bloomberg, Barclays Research

Note: Credit performance measured as excess returns to compare the pure


spread performance. Source: Bloomberg, Barclays Research

FIGURE 3
Germany, UK and US: Sharpe ratios since 1994

FIGURE 4
Optimal allocation to equities, pretty low for Japan
35%

Sharpe Ratio
0.9

30%

0.8

25%

0.7
0.6

20%

0.5

15%

0.4

US
Source: Bloomberg, Barclays Research

13 February 2014

UK

JP

US

DE

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Equity

Jan-08

Slope [5-30]
Germany

Jan-07

Slope [2-5]

Jan-06

Tsy

Jan-05

0%

Jan-04

0.1

Jan-03

5%
Jan-01

0.2

Jan-02

10%

0.3

UK

Source: Bloomberg, Barclays Research. Note: For each 10 year period we


construct an in-sample maximum Sharpe ratio portfolio.

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FIGURE 5
Japan: Sharpe ratios conditional upon inflation
1.0

FIGURE 6
US: Sharpe ratios conditional upon inflation
1.4

Japan : Sharpe ratio

US : Sharpe ratio

1.0

0.6

0.6

0.2

0.2

-0.2

Low inflation

High inflation

Low inflation

Source: Bloomberg, Barclays Research

Credit : Ex Ret

Equity

Slope [5-30]

Tsy

Equity

Slope [5-30]

-1.0

Slope [2-5]

-1.0
Tsy

-0.6

Slope [2-5]

-0.2

-0.6

High inflation

Source: Bloomberg, Barclays Research

12-month ahead inflation being above or below median. The results are quite clear.
Even during Japans deflationary phase, above-median inflation produced higher
Sharpe ratios for equities. If inflation were to move toward a more normal
backdrop, as in the US and UK, the optimal allocation should swing toward an even
higher weighting to equities. Thus, even modest success in generating higher
inflation levels appears to encourage Japanese investors to rotate out of fixed income
into riskier assets. If such an allocation shift were to occur, the effect on relative asset
prices could be very large indeed.
Even modest success in
generating higher inflation in
Japan could lead to sizable
asset allocation shifts and, as a
consequence, big changes in
relative prices

Figure 8 compares the total allocations of the Japanese pension fund industry and the
government pension fund (GPIF) with those of other countries. The average nonJapanese pension fund allocates about 50% of its portfolio to equities, compared with
just 35% of holdings by Japanese private and public pension funds. The table also
shows the GPIF advisory panels recent recommendations for allocation shifts.
Assuming these are adopted, the allocation shifts would amount to a sizable $145bn. If
the entire Japanese pension fund industry undertook a similar shift, the numbers could
amount to a $450bn rotation out of fixed income into equities. On a national level, the
vast majority of domestic investors are overweight bonds; thus, a continued rise in
inflation could imply extremely large asset allocation shifts and, consequently, big
changes in relative prices.

FIGURE 7
Germany: Sharpe ratios conditional upon inflation
1.4

FIGURE 8
Global pension fund allocations: Japan may play catch up
Total assets $bn
2012

Equity

3721

35%

55%

7%

3%

UK

2736

45%

37%

17%

1%

US

16851

52%

27%

20%

0%

World ex Japan

26033

49%

31%

20%

1%

Total assets $bn

Equity

GPIF (June 2013


allocation)

1212.4

27%

68%

5%

GPIF near term


target

1212.4

30%

65%

5%

GPIF 1-2yr target

1212.4

39%

56%

5%

Germany : Sharpe ratio

1.0

Japan

0.6
0.2
-0.2
-0.6

Low Inflation
Source: Bloomberg, Barclays Research

13 February 2014

Equity

Slope [5-30]

Slope [2-5]

Tsy

-1.0

Bond Other Cash

Bond Other Cash

High Inflation
Source: Tower Watson, Barclays Research

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Barclays | Equity Gilt Study


In Germany, inflation seems to have less of an effect on Sharpe ratios than in the other
countries. Figure 7 shows that the inflation-conditional Sharpe ratio is very stable
across both high and low inflation, unlike Japan and the US, which swung from negative
to positive risk-adjusted returns as the economy shifted from a low to high inflation
regime. The lower sensitivity to inflation may be due partially to the fact that European
inflation trends have been relatively stable compared with the US and UK during this
period so may have had less of an effect on the asset allocation decision. This relative
insensitivity of equity returns may well change if Europe continues on the disinflation
trend and inflation volatility picks up.

Is there an inflation sweet spot for investors?


History suggests an inflation
sweet spot for investors of
around 3%, with extremes in
either direction de-rating
equity returns

The above analysis was conducted for 1994-2013, a period dominated by the secular
decline in bond yields and relatively low and stable inflation. This explains why the
optimal allocation to fixed income is so high; even in the US, the analysis suggests a
70% allocation to Treasuries. However, if yields were to trend steadily higher over the
coming years, the optimal equity allocations might also trend higher in response to
rising inflation expectations. To get a more comprehensive view of the potential effect
of inflation, it is necessary to look over a longer horizon with different inflation
environments and trends in bond yields. We examine US data back to the 1970s to
capture the effect of extremely high and low inflation. Figures 9 and 10 rank the Sharpe
ratios of equities and bonds across inflation deciles to get a clearer picture of
performance across the cycle. Figure 9 suggests that inflation extremes in either
direction de-rate equity returns, and the best performance occurs during the 4th to 7th
decile. The blue line shows the average inflation rate in each decile and suggests that
the inflation sweet spot for US equity investors is about 3%, just above the central
banks target range.1 Bond performance, on the other hand, progressively worsens as
inflation rises, with the Sharpe ratio collapsing to -1.5 in the 10th decile. Equity
allocation appears to rise with inflation without a similar trend in equity performance.
Figure 11 suggests the optimal allocation between equities and bonds would favour
100% allocation to equities during the 8th to 10th decile, the lesser of the two evils, as
bond returns collapse during extremely high inflation.

FIGURE 9
Average US equity performance across inflation deciles
(1970 to date)
1.0

Equities : Sharpe ratios vs. CPI deciles

0.8
0.6
0.4
0.2
0.0
-0.2
1

5
6
7
8
9
10
CPI deciles =>
Sharpe ratio
Average CPI per decile: RHS

Source: Bloomberg, Barclays Research

FIGURE 10
Average Treasury performance across inflation deciles
(1970 to date)

14%

1.5

12%

1.0

12%

10%

0.5

10%

8%

0.0

8%

6%

-0.5

6%

4%

-1.0

4%

2%

-1.5

2%

0%

-2.0

Treasuries : Sharpe ratios vs. CPI deciles

Sharpe ratio

14%

0%
5
6
7
8
9
10
CPI deciles =>
Average CPI per decile: RHS

Source: Bloomberg, Barclays Research

In the US, Core PCE of 2% is consistent over the long run with the Feds mandate for price stability. This implies
headline CPI of 2.4%yy

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5
6
7
CPI deciles =>
Equity allocation

Source: Bloomberg, Barclays Research

CPI : RHS

10

2014

2010

2006

0%
1

2002

2%

1998

4%

1994

6%

1990

8%

1986

10%

16
14
12
10
8
6
4
2
0
-2
-4
1982

12%

%yy

1978

14%

1974

Equities allocation vs. CPI deciles

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

FIGURE 12
Capturing inflation extremes, US CPI % y/y since 1970

1970

FIGURE 11
Optimal equity allocation across inflation regimes (1970
to date)

US CPI % yy
Source: Bloomberg

This inflation sweet spot naturally leads to the question of the growth effect on
investment decisions. An inflation sweet spot of 3%, just above the central banks
target, suggests a backdrop of reasonable economic growth, either near or just above
the economys potential growth rate, but not yet overheating. Perhaps economic
growth matters more than inflation in determining asset performance and, in turn,
investors relative preference for equities vs. bonds. In the case of Germany, we saw
earlier that equity performance was very stable across both high and low inflation
regimes. This may be a result of the relative stability of inflation in Europe compared
with the other countries. US and UK investors who experienced a backdrop of greater
inflation volatility during that period were exposed to sharper downgrades in equity
performance. Figure 13 shows that the risk-adjusted performance of European assets is
far more sensitive to the high/low GDP regimes than to the inflation regimes; thus,
stronger growth indicators provided a greater support for risk assets than high or low
inflation data. Repeating the analysis for other countries showed that the responses of
Sharpe ratios across inflation and growth regimes were of a similar magnitude.
Thus, an anecdotal observation from this analysis suggests that there is an investment
sweet spot that is not just dependent on the level of inflation, but also its volatility.
The US and Japan experienced relatively more volatile inflation cycles over the past 20
years, and the effect on asset allocation decisions has been markedly different. This
provides us with a warning for allocating in Japan, in that we will need to see the right
amount of Abenomics for investors truly to benefit from the transition out of deflation.
While in Europe, the relative stability of equity performance may be under threat if
deflation sets in and CPI becomes more volatile.

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FIGURE 13
German equities were more sensitive to growth regimes
(1994-2013) as the inflation backdrop remained
relatively stable

FIGURE 14
US and Japan experienced greater inflation volatility than
Europe over the past 20 years
7

Sharpe ratio

1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4

5
4
3
2
1
0
-1
-2
Tsy
Low inflation

Slope [2-5]

Slope [5-30]

High inflation

Low growth

-3

Equity

94

High GDP

96

98

00

US CPI yy

Source: Bloomberg, Barclays Research

02

04

06

Eurozone HICP yy

08

10

12

Japan CPI yy

Source: Bloomberg, Barclays Research

In order to truly understand the asset allocation implications for Europe, we return to our
long run analysis for the US. Focusing specifically on the inflation extremes, we find that
low inflation or deflationary regimes do not necessarily have a uniform effect on equity
performance. Drilling into the lowest three inflation deciles, we find that the equity
performance can actually be quite diverse and include periods of very strong returns. In
searching for a reason behind this, or an alternative driver for asset returns, we find that
investment growth could be a key factor. Figure 15 highlights the importance of the
investment cycle by examining the equity Sharpe ratios across investment deciles this
time, instead of inflation. We overlay the average inflation rate across the investment
deciles and see that the investment cycle is fairly independent of the inflation regime.
Equity performance, however, has been highly correlated with the investment cycle since
the 1970s, with Sharpe ratios steadily improving with investment growth.
Whereas reflation favours a
higher allocation to equities,
deflation can provide a good
or bad backdrop for equities.

Figure 16 examines the low inflation regimes and the effect of high and low investment on
asset performance. Here, we see a big differentiation between equity Sharpe ratios. While
bond performance remains stable across the two regimes, benefiting from the backdrop of
low inflation, equities are de-rated dramatically during periods of low investment, while high
investment periods produce risk-adjusted returns in line with bonds.

FIGURE 15
Equity returns rise in line with investment growth
1.5

FIGURE 16
Sharpe ratios for the lowest three inflation deciles:
Differentiated by investment growth

Equities : Sharpe ratios vs. Investment growth deciles

6%

1.0

5%

0.5

4%

0.0

3%

-0.5

2%

-1.0

1%

-1.5

0%

1.2

Sharpe ratios : lowest 3 deciles of inflation

1.0
0.8
0.6
0.4
0.2

3
4
5
6
7
8
9
Investment growth declies =>
Sharpe Ratio
CPI : RHS

Source: Bloomberg, Barclays Research

13 February 2014

10

0.0
-0.2
-0.4
-0.6
Unconditional

Low investment
Equities
Bonds

High investment

Note: High/low investment defined as above/below median investment 9


months ahead. Source: Bloomberg, Barclays Research

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FIGURE 17
Optimal allocations for the lowest three inflation deciles: The investment cycle makes
a difference
1.0
0.9
0.8
0.7

10% equities
90% bonds

0% equities
100% bonds

30% equities
70% bonds

0.6
0.5
0.4
0.3
0.2
0.1
0.0
Unconditional

Low investment
Equity allocation

High investment
Bond allocation

Source: Bloomberg, Barclays Research

The investment cycle is key in


determining equity allocations
during periods of low inflation
or deflation

This analysis suggests that while inflation is an important factor in determining the
relative allocation between equities and fixed income, we also need to consider the
investment cycle. Our earlier analysis showed (Figure 10) that bonds have had a clear
linear relationship with inflation, with returns being steadily eroded as inflation rises.
Consequently, the optimal allocation to equities will also be affected as inflation rises; at
high inflation extremes, equity returns, although negative, will outperform fixed income
instruments. However, at the other extreme, the investment cycle is also important in
determining how to allocate if we slip into deflation. Figure 17 shows how the optimal
allocation during the lowest three deciles changes across investment regimes.
Independent of the investment cycle, the equity allocation would be just 10%; however,
above-trend investment would warrant a 30% allocation to equities, while below trend
would favour 100% fixed income.
These results are in line with academic studies focusing on deflation. Bordo and Filardo
(2005) conduct an historical survey of deflation dating back to 1800 and identify
periods of good, bad and ugly deflation. The common driver that tipped deflation
into bad or ugly seemed to be a banking crisis and the contraction of credit which in
turn dampened investment. They emphasise the importance of credit cycles in
determining the type of deflation that occurs, and the potential impact on equity
returns. In our view, the investment cycle seems to provide us with a reliable indicator
of this dynamic and can provide a useful framework in ascertaining the potential
corporate earnings and in turn, potential equity returns.2
So what are the investment implications for Japan and Europe, given the recent
divergence in inflation trends?

If Japan transitions out of deflation into inflation, then the effect would seem
relatively clear cut. We should see equities starting to outperform, and that, in turn
should induce large asset allocation shifts by Japanese investors out of fixed income
into equities. This supports the strategic case to stay long Japanese equities.

For Europe, however, the story is less clear-cut. Deflation would clearly support
bonds and there are certainly far greater risks to the strategic view for being long
equities in a deflationary environment. However, we can also classify the potential
outcome into periods of good and bad deflation. As the eurozone undergoes a
mild internal devaluation accompanied by deflation in some countries, there are
risks that equity valuations are misleadingly cheap. However, if the banking sector
continues the clean-up process and if private investment is able to improve, the
backdrop for equities could be positive, even if deflation becomes a reality.
2

13 February 2014

Bordo M, and Filardo, A (2005) Deflation in a historical perspective BIS Working Papers No 186.

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CHAPTER 7

UK asset returns since 1899


Sreekala Kochugovindan
+44 (0)20 7773 2234
sreekala.kochugovindan@
barclays.com

We analyse returns on equities, gilts and cash from end-1899 to end-2013. Index-linked
gilt returns are available from 1982, while corporate bonds begin in 1999. To deflate the
nominal returns, a cost-of-living index is computed using Bank of England inflation data
from 1899 to 1914 and the Retail Price Index, calculated by the Office of National
Statistics, thereafter.
FIGURE 1
Real investment returns by asset class (% pa)
Last

2013

10 years

20years

50years

114 years*

Equities

17.4

5.0

4.1

5.5

5.1

Gilts

-9.6

2.5

3.5

2.5

1.2

Corporate Bonds

-1.0

1.8

Index-Linked

-3.9

2.7

3.2

Cash

-2.3

-0.5

1.3

1.5

0.8

Note: * Entire sample. Source: Barclays Research

Figure 1 summarises the real investment returns of each asset class over various time
horizons. The first column provides the real returns over one year, the second column
real annualised returns over 10 years, and so on. As far as financial markets are
concerned, 2013 can be described as a year of two halves: pre- and post-tapering fears.
Fed Chairman Ben Bernankes speech on 22 May signalled the inflexion point for UK
and US bond markets. Gilts sold off in synch with US Treasuries. 10y gilt yields rose
from near historic lows of 1.6% to end the year above 3%. The BoEs new governor,
Mark Carney, introduced forward guidance in August in an attempt to decouple UK
rates from the US trend, with little success. Annual real bond returns of -9.6% in the UK
are the worst since the bond rout of 1994, when gilts sold off 14% in real terms.
Inflation-linked bonds had a turbulent start to the year. Investors had anticipated and
priced in a change in the RPI formula that would result in a structural narrowing in the
RPI/CPI basis. After the National Statistician announced that no changes would be
made, index-linked gilts posted their strongest one-day rally since 1987. Breakeven
inflation was broadly stable in the second half of the year and the bulk of the sell-off in
linkers was driven by the nominal market. Equity markets performed well despite the
turbulence introduced by monetary policy uncertainty. The FTSE All-Share initially sold
off 11% in response to tapering fears introduced in May, before recovering to end the
year up 17% in terms of nominal capital returns.
FIGURE 2
Real investment returns (% pa)
Equities

Gilts

Index-linked

Cash

1903-1913

3.3

-0.2

1.5

1913-23

-1.3

-3.1

-1.5

1923-33

9.6

9.6

5.7

1933-43

3.2

0.5

-2.4

1943-53

2.7

-2.4

-2.6

1953-63

12.1

-1.7

1.2

1963-73

1.5

-3.7

0.5

1973-83

5.2

1.9

-1.3

1983-93

12.9

7.6

5.7

1993-2003

3.2

4.6

3.7

3.1

2003-2013

5.0

2.5

2.7

-0.5

Source: Barclays Research

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FIGURE 3
Distribution of real annual equity returns
10

FIGURE 4
Distribution of real annual gilt returns
14

12

10

7
6

5
6

4
3

0
-50 -42 -34 -26 -18 -10 -2

14 22 30 38 46 54

-50 -42 -34 -26 -18 -10 -2

14 22 30 38 46 54

Source: Barclays Research

Source: Barclays Research

FIGURE 5
Distribution of real annual cash returns

FIGURE 6
Maximum and minimum real returns over various periods

30

23 year

25
20

Cash

Gilts

Equities

20 year

15

10 year

10

5 year
5

1 year

0
-50 -42 -34 -26 -18 -10 -2

14 22 30 38 46 54

Source: Barclays Research

-60% -40% -20% 0%

20% 40% 60% 80% 100%

Source: Barclays Research

Figure 2 breaks down real asset returns for consecutive 10-year intervals. Equities
outperformed cash and bonds over the past decade, with an average annualised return
of 5% since 2003. Cash, on the other hand, has delivered the worst returns since the
stagflationary 1970s. Ranking the annual returns and placing them into deciles provides
a clearer illustration of their historical significance. The results for 2013 are shown in
Figure 7. The equity portfolio is ranked in the third best decile since 1899, up from the
fifth decile in 2012, as a result of the relatively strong rally in the second half of the year.
Gilts and linkers are ranked in the 9th decile down sharply from the fifth decile in 2012
following the sharp sell off in 2013. Cash remained weak as yields were held near zero.
FIGURE 7
2013 performance ranked by decile (1899-2013)
Decile
Equities

Gilts

Index-Linked

Cash

Notes: Deciles ranking: 1 signifies the best 10% of the history, 10 the worst 10%. Source: Barclays Research

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Figures 3-5 illustrate the distribution of returns over the past 114 years. They show that
equity returns have the widest dispersion, followed by gilts and then cash. The observed
distributions are in accordance with financial theory; from an ex-ante perspective, we
would apply the highest risk premium to equities, given their perpetual nature and our
uncertainty over future growth in corporate profits and changes in the rate of inflation.
For gilts, the uncertainty with respect to inflation remains, but the risk from the
perspective of coupon and principal is reduced, given their government guarantee. Over
the past 30 years, the dispersion of annual gilt returns has widened significantly; in the
1970s and 1980s, an unexpected increase in the inflation rate led to significant negative
real returns, while in the 1990s, an unanticipated fall in inflation, in conjunction with
lower government deficits, facilitated above-average real returns. The cash return index
has the lowest dispersion. In recent years, the real returns to cash have been relatively
stable, with the move toward inflation-targeting by the Bank of England stabilising the
short-term real interest rate.

Performance over time


Having analysed annual real returns since 1899, we now examine returns over various
holding periods. Figure 6 compares annualised returns when the holding period is
extended to 5, 10 or 20 years, or beyond.
The most striking feature of the chart is the change in the volatility of returns as the
investments are held for longer periods. The variance of equity returns falls significantly
relative to the other assets as the holding period is extended. When equities are held for
as long as 20 years, the minimum return is actually greater than for either gilts or cash.
However, as discussed in past issues of this study, we do not believe that this fall in
volatility should be interpreted as an indication of mean reversion in the returns. The
series used comprise of rolling returns; hence, there is an overlap in the data. For
example, in the 10-year holding period, nine of the annual returns will be the same in
any consecutive period; thus, the observations cannot be considered to be
independently drawn.
Figure 8 illustrates the performance of equities against gilts and cash for various holding
periods. The first column shows that over a holding period of two years, equities
outperformed cash in 76 out of 113 years; thus, the sample-based probability of equity
outperformance is 67%. Extending the holding period out to 10 years, this rises to 90%.
FIGURE 8
Equity performance
Number of consecutive years

Outperform cash

10

18

76

78

80

82

95

96

Underperform cash

37

34

31

28

10

Total number of years

113

112

111

110

105

97

Probability of Equity
Outperformance

67%

70%

72%

75%

90%

99%

Outperform Gilts

77

83

84

81

83

85

Underperform Gilts

36

29

27

29

22

12

Total number of years

113

112

111

110

105

97

Probability of Equity
Outperformance

68%

74%

76%

74%

79%

88%

Source: Barclays Research

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The importance of reinvestment


Figures 9 and 10 show how reinvestment of income affects the performance of the
various asset classes. The first table shows 100 invested at the end of 1899 without
reinvesting income; the second is with reinvestment. One hundred pounds invested in
equities at the end of 1899 would be worth just 191 in real terms without the
reinvestment of dividend income, but with reinvestment the portfolio would have
grown to 28,386. The effect upon the gilt portfolio is less in absolute terms, but the
ratio of the reinvested to non-reinvested portfolio is over 500 in real terms.
FIGURE 9
Todays value of 100 invested at the end of 1899 without
reinvesting income

Equities
Gilts

FIGURE 10
Todays value of 100 invested at the end of 1899, income
reinvested gross

Nominal

Real

14915

191

Equities

0.66

Gilts
Cash

52

Source: Barclays Research

Nominal

Real

2,214,856

28,386

30,591

392

20,363

261

Source: Barclays Research

FIGURE 11
Five-year average dividend growth rates
20%
15%
10%
5%
0%
-5%
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: Barclays Research

Turning to the dividend growth ratio, the FTSE All-Share dividend rose 7% in 2013,
following 10% in 2012. Figure 11 shows that the five-year average growth rate has picked
up following the steady declines of recent years after corporates began cutting dividends
in 2008. In 1997-2001, dividend income had fallen by a cumulative 15% as companies cut
dividends on the basis that funds would be put to better use by corporates than by
shareholders. In the wake of the dotcom crash, investors actively sought income-yielding
stocks as a way to lower risk.
Figures 12 and 13 illustrate the time series of price indices and total return indices for
equities, gilts and cash over the entire series. These returns are in nominal terms and
are shown with the use of a logarithmic scale.

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FIGURE 13
Barclays total return indices Nominal terms, gross
income reinvested

FIGURE 12
Barclays price indices Nominal terms

10,000,000

100000
10000
1000

10,000
100
10

Equities

Gilts

Retail Prices

Equities

Gilts

2009

1999

1989

1979

1969

1959

1949

1939

1929

1919

1899

1909

10

2009

1999

1989

1979

1969

1959

1949

1939

1929

1919

1909

1899

T-Bills

Source: Barclays Research

Source: Barclays Research

FIGURE 14
Todays value of 100 invested at the end of 1945 without
reinvesting income

FIGURE 15
Todays value of 100 invested at the end of 1945, gross
income reinvested

Equities
Gilts

Nominal

Real

9,347

271

56

Source: Barclays Research

Equities

Nominal

Real

177,620

5,140

Gilts

6,569

190

Cash

6,236

180

Source: Barclays Research

FIGURE 16
Todays value of 100 invested at the end of 1990, gross income reinvested
Nominal

Real

Equities

742

380

Gilts

646

331

Index-Linked Gilts

498

255

Treasury Bills

299

153

Source: Barclays Research

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CHAPTER 8

US asset returns since 1925


Sreekala Kochugovindan
+44 (0)20 7773 2234
sreekala.kochugovindan@
barclays.com

We analyse returns on equities, government bonds and cash. The total sample includes 88
annual return observations. The construction of the series is explained in more detail in the
indices in Chapter 9 (Barclays Indices). The corporate bond performance is captured using
the Barclays Investment Grade Corporate Long Index, which incorporates bonds with a
maturity of 10 years or more. The Barclays US Inflation Linked 15-year Plus Index is used to
represent the performance of TIPS. The nominal return series are deflated by the change in
the consumer price index, which is calculated by the Bureau of Labor Statistics. The first
holding period covered in this analysis is the calendar year 1926, representing money
invested at the end of 1925 and its value at the end of 1926.
FIGURE 1
Real investment returns (% pa)
Last

2013

10 years

20 years

50 years

88 years*

Equities

28.6

5.5

6.7

5.7

6.6

Government Bond

-13.0

3.4

4.5

3.0

2.4

0.9

0.5

TIPS

-20.3

3.2

Corporate Bond

-7.1

3.9

4.7

Cash

-1.5

-0.8

0.4

*Note: Entire sample. Source: Centre for Research into Security Prices (CRSP) provided US asset return data for the
past 14 years, Barclays Research

Figure 1 provides real annualised returns over various time horizons. US asset returns in
2013 followed a similar trend to those of the UK, set out in Chapter 7 (UK asset returns
since 1899). Equities were the best-performing assets of 2013, producing a c.29% real total
return, despite following a turbulent path similar to that of the UK as investors digested news
of monetary policy normalisation by the Fed.
Returns on Treasuries and TIPS collapsed in 2013, following Fed Chairman Ben
Bernankes speech on 22 May which first mentioned the prospect of tapering asset
purchases. 10-year yields rose from near historical lows of 1.6% to end the year above
3%. Real total returns on Treasuries fell 13% in 2013, compared with a 2% real total
return in 2012. Corporate bonds returns were also weak. However, the annual figure
masks the rally that began in August. Credit returns initially collapsed in the wake of
Bernankes May speech, alongside other risk assets such as equities. Unlike equities, the
rally in the second half of the year was not enough to recoup the earlier losses. Figure 2
breaks the study period down into consecutive decades.
FIGURE 2
Real investment returns (% pa)
Equities

Government Bond

Corporate Bond

Cash

1933-43

4.8

1.7

-2.6

1943-53

8.8

-2.3

-3.3

1953-63

13.8

0.6

0.9

1963-73

1.7

-1.6

0.8

1973-83

3.6

-2.0

0.6

1983-93

9.9

10.0

9.9

2.5

1993-2003

7.9

5.5

5.5

1.7

2003-2013

5.5

3.4

3.9

-0.8

Source: CRSP, Barclays Research

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Equities outperformed Treasuries and corporate bonds in the most recent decade. A total
real return of 5.5% is in line with the average returns of the past 50 years, but below the
average performance since 1925 of 6.6%. Equities best decades were in the 1950s and the
1980s. Bonds have enjoyed strong performance over the past three decades relative to
preceding decades, largely as a result of continued disinflation since the late 1970s.
However, the weak bond performance of 2013 has pulled the average returns for the
decade down from 5% to 3.4%.
Figure 3 ranks the relative performance of 2013 returns by deciles to get a clearer
indication of their historical significance. The US equity ranking has jumped from the 5th
decile in 2012 to the 2nd in 2013. Bonds moved from the 6th decile in 2012 to the worst
in 2013 as investors fled Treasuries on concerns around the impact of policy
normalisation. Cash returns remained weak, with negative real returns placing them in
the 8th decile.
FIGURE 3
Comparison of 2013 real returns with historical performance ranked by decile
Decile
Equities

Govt Bond

10

Cash

Notes: Deciles ranking - 1 signifies the best 10% of the history, 10 the worst 10%. Source: CRSP, Barclays Research

Figures 4-6 plot the sample distributions with identical maximum and minimum
categories across each. These charts are useful in that they allow the reader to appreciate
the volatility of each asset class while gaining an understanding of the distribution of the
annual return observations. Clearly, overall, cash exhibits the lowest volatility of each asset
class, with bonds next and equities having the highest dispersion of returns.

FIGURE 5
Distribution of real annual bond returns

FIGURE 4
Distribution of real annual cash returns
35

12

30

10

25

20
6

15
4

10

0
-50 -40 -30 -20 -10
Source: CRSP, Barclays Research

13 February 2014

10

20

30

40

50

60

-50 -40 -30 -20 -10

10

20

30

40

50

60

Source: CRSP, Barclays Research

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FIGURE 7
Maximum and minimum real returns over different periods

FIGURE 6
Distribution of real annual equity returns
7
6

Cash

20 year

5
4

Bonds

Equities

10 year

3
2

5 year

1
1 year

0
-50 -40 -30 -20 -10

10

20

30

40

50

60

Source: CRSP, Barclays Research

-50%

-30%

-10%

10%

30%

50%

Source: CRSP, Barclays Research

Figure 7 shows the extremes of the return distribution for various holding periods. The
volatility of equities over very short horizons is clearly demonstrated in the maximum and
minimum distribution of one-year returns. As we extend the holding period, the
distribution begins to narrow. Over the past 88 years, the worst average annualised 20year return for equities was 0.9%, while the best was 13%. However, this is not to say that
it is impossible to lose money by holding equities over a 20-year period, as the analysis is
conducted on an ex-post basis. The figure merely highlights that such an occurrence
seems unlikely, given equities performance over the past 88 years.
In addition, over the long term, we would expect the ex-ante equity risk premium to
provide a cushion against uncertainty. Bonds and cash have experienced negative
returns over a 20-year investment horizon, reflecting unexpected jumps in inflation at
various points in the past century.
Figure 8 plots the US equity risk premium and shows that the 10-year annualised excess
return of equities over bonds has bounced back from the lows of 2008 and moved back into
positive territory.
FIGURE 8
Equity-risk premium excess return of equities relative to bonds (10y annualised)
20%
15%
10%
5%
0%
-5%
-10%
1935

1946

1957

1968

1979

1990

2001

2012

Source: CRSP, Barclays Research

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The importance of reinvestment


Figures 9 and 10 show the importance of reinvestment of income in the form of
dividends on equity investments and coupons on government bonds.
FIGURE 10
Barclays US total return indices in nominal terms with
gross income reinvested

FIGURE 9
Barclays US price indices in nominal terms
1,000,000

1,000,000

10,000
1,000
100

Equities

Bonds

Consumer Prices

Source: CRSP, Barclays Research

Equity

Bonds

2013

2005

1997

1989

1981

1973

1965

1957

1949

1941

1933

1925

2013

2005

1997

1989

1981

1973

1965

1957

1949

1941

1933

1925

Cash

Source: CRSP, Barclays Research

FIGURE 11
Value of $100 invested at the end of 1925 without reinvesting income

Equities
Bonds

Nominal

Real

$13,022

$1,000

$116

$9

Source: CRSP, Barclays Research

FIGURE 12
Value of $100 invested at the end of 1925 with income reinvested gross

Equities

Nominal

Real

$363,007

$27,882

Bonds

$10,754

$826

Cash

$2,043

$157

Source for both tables: CRSP, Barclays Research

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CHAPTER 9

Barclays indices
Sreekala Kochugovindan
+44 (0)20 7773 2234
sreekala.kochugovindan@
barclays.com

We have calculated three indices: changes in the capital value of each asset class;
changes to income from these investments; and a combined measure of the overall
return, on the assumption that all income is reinvested.
Additional series allow for the effects of inflation. The data for cash include building
society deposit rates and Treasury bills. The series on index-linked securities is based at
December 1982 and the corporate bond index starts at the end of 1990.

Barclays Equity Index


The Barclays Equity Index is designed to give as accurate a measure as possible of the
performance of a representative portfolio of equities. Three main types of index can be
used. The FT Index, which for years was the most widely used in the UK, is geometric,
meaning that the price changes of the 30 shares it comprises are multiplied together to
produce the change in the index. We believe that this is a fair basis for indicating shortterm market behaviour, but that over long periods it imparts a downward bias. The
second type of index uses the Dow formula, in which the prices of a number of shares are
added together. This does not have the distorting effect of a geometric index, but the
weighting of the various shares is arbitrary and varies with changes in capitalisation.
We think the most accurate and representative indices are arithmetic and weighted by
the number of shares in issue by each company. These indices include virtually all of the
large quoted companies, and thus we believe they accurately reflect the behaviour of an
equity market. The Standard & Poors Indices are of this type, and they date back to the
1920s. The FT Actuaries Indices, introduced in the 1960s, were the first of this type in
the UK. Subsequently, a number of weighted arithmetic international indices, such as
those calculated by Morgan Stanley Capital International and Datastream, have been
introduced. More recently, the FTSE 100 Index, which uses the same construction but
incorporates only the 100 leading shares, has been introduced and, generally, is now
used as the main market indicator because it is calculated on a real-time basis
throughout the day.
The Barclays Equity Index, which is used in this study, is a weighted arithmetic index, and
is available for the period since 1899, with a dividend yield and an income index. The
original Barclays Equity Index, used in editions of this study until 1999, was first calculated
retrospectively in 1956 and included 30 shares chosen because of their similarities to the
FT 30 Index, which covers the 1935 to 1962 period. For the 2000 edition of this study, we
compiled a new index for 1899-1935, based on the 30 largest shares by market
capitalisation in each year. From 1962, the Barclays Equity Index is based on the FTSE
Actuaries All-Share Index because, with its broader coverage, it gives a more accurate
picture of market movements. The indices are calculated only annually, at year-end.
The equity returns between 1899 and 1935 are therefore calculated from a new Equity
Index, consisting of the 30 largest shares by market capitalisation in each year; between
1935 and 1962 they are calculated from the FT 30 Index and from 1962 onward they
are derived from the FTSE Actuaries All-Share Index.

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FIGURE 1
Equity Index constituents
Constituents at December 1899

Constituents at December 1934

Constituents at December 1962

De Beers Consolidated Mines


Rio Tinto Ltd

Woolworth Ltd
Imperial Chemical Industries

Associated Portland Cement


Bass Mitchells & Butlers

Armstrong Whitworth
Consolidated Gold Fields
London and County Bank

Shell' Transport & Trading Ltd


Courtaulds Ltd
Royal Insurance Co

British Motor
Coats Patons
Cory (William)

London City & Midland Bank Ltd

Barclay & Company

Courtaulds

Lloyds Bank Ltd


London & Westminster Bank Ltd
Vickers, Sons & Maxim Ltd

Lloyds Bank
Prudential Assurance Co Ltd
Westminster Bank Ltd

Distillers
Dunlop
EMI

Imperial Ottoman Bank

Midland Bank Ltd

Fine Spinners & Doublers

Parrs Bank Ltd


Royal Insurance Co

London & Lancashire Fire Ins. Co


North British & Mercantile In. Co Ltd

General Electric
Guest Keen

Tharsis Sulphur & Copper Ltd


Great Northern of Copenhagen
Simmer & Jack PropietaryMines Ltd

Reckitt & Sons Ltd


County of London Electric Supply Co
Unilever Ltd

Hawker Siddeley
House of Fraser
ICI

North British & Mercantile Insurance

Tate & Lyle Ltd

Imperial Tobacco

Consett Iron Ltd


Eastern Extension Australasia * China Ltd
Nobel Dynamite TstLtd

Alliance Assurance Company


Boots Pure Drug Co Ltd
Pearl Assurance Co

International Stores
Leyland Motors
London Brick

Mysore Gold Mining Ltd

Marks & Spencer Ltd

Murex

Exploration Co
Alliance Assurance Co

Cory (WM.) & Son


National Bank Of Egypt

P&O Steam Navigation


Rolls-Royce

Aerated Bread Ltd


Howard & Bullough Ltd
Sun Insurance Office

Consolidated Gold Fields Of South Africa


Bass, Ratcliff & Gretton Ltd
GeduldProp Mines Ltd

Swan Hunter
Tate & Lyle
Tube Investments

New JagersfonteinMining & Expl Ltd

Sun Insurance Office

Turner & Newall

Champion Reef Gold Mining


National Telephone Ltd
Northern Assurance

Bank Of Australasia
British South Africa Co
Chartered Bank Of India, Australia & China

United Steel
Vickers
WatneyMann

Phoenix Assurance Co

North Eastern Elec Supply Co

Woolworth

Source: Barclays Research

The Equity Index is a weighted arithmetic average. In the Equity Index, the weights of
the 30 constituent companies for each year are proportional to their market
capitalisation at the beginning of the year. Each year a fund was constructed. The
number of shares in the fund for each company was calculated so that its market value
at the beginning of the year was equal to the companys index weighting. The value of
the fund was calculated annually at the end of the year.
For 1899-1962, the Equity Income Index is based on the Barclays Equity Fund. The
Income Index relates to the dividend income actually received in the 12 months prior to
the date of the index. It is calculated by totalling the dividends paid on the shares in the
fund. We believe that it is the only published index based on actual income receipts.
From 1963 the Income Index is derived from the yield on the FTSE All-Share Index.
Despite a minimal discontinuity in the yield, in our view, this is the most representative
method of evaluating equity performance over the period. The dividend yield is quoted
net from 1998, with non-taxpayers no longer able to reclaim ACT.

Barclays Gilt Index


The Gilt Index measures the performance of long-dated gilts. From 1899 to 1962 the
index is based on the prices of undated British funds. During this period the undated
stocks were a major part of the gilt market, but over the years the effect of high interest
rates on their prices, together with the growing number of conventional long-dated
issues, meant that undated stocks became less and less representative of the market as
a whole.
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Since 1962, the Barclays Gilt Index has been based on a portfolio of long-dated stocks,
selected on 1 January each year. The portfolio was chosen to represent as closely as
possible a 20-year security on a par yield, and contains a weighted combination of four
long-dated stocks with a mean life of 20 years (so that the average life of the stocks
for the year in which they are in the portfolio was 20 years). The combination and
weightings of the four stocks are chosen to have the minimum possible deviation from
a par yield. Small issues (less than 1bn) are excluded and in any year none of the four
stocks has been allocated a weight of more than 40%, or less than 5% of the index.
During the late 1980s there was a steady contraction in the number of issues that
satisfied the criteria for inclusion in the Gilt Index. As a result of the lack of issues of
new long-dated stocks and the fall in the remaining life of existing stocks, the universe
of eligible stocks narrowed sharply. By the end of 1989 there were four stocks with a life
of more than 20 years, and only two of these were over 1bn nominal.
Thus from the beginning of 1990 the index has been constructed to represent a
portfolio of 15-year par yielding gilts.

Barclays Inflation-linked Index


The index-linked market has now been established for almost three decades and is
capitalised at 374bn (compared with the 1.15trn capitalisation of the conventional
market). The index has been constructed to mirror as closely as possible the rules of the
conventional gilt index. An average life of 20 years was used up until 1990, and 15 years
thereafter. Again, stocks have been chosen to be as close to par as possible, although of
course in this case par means indexed par.

Barclays Corporate Bond Index


The UK corporate bond market has expanded markedly since the beginning of 1999. The
index and returns are based on the Barclays Sterling Aggregate Corporate Index. Clearly,
we are unable to select individual stocks for this index in the way we do for the gilt indices
because such a small sample of stocks cannot be representative of the market.

Barclays Building Society Fund


In previous editions of this study we have included indices of the value of 100 invested in
a building society at the end of 1945. We originally used the average interest rate on an
ordinary share account. In the mid-1980s many building societies introduced new tiered
interest rate accounts, which provided a higher rate of interest while still allowing instant
access. In response to this we have been tracking both types of account, but as time
progressed the old style ordinary share accounts became less and less representative and
by the mid-1990s had been completely superseded by the new accounts. From 1986 the
Barclays Index follows the Halifax Liquid Gold Account (formerly called the Halifax Instant
Xtra) as a representative of the newer tiered interest rate-style accounts. The Halifax is no
longer a building society, having converted to a bank, so from 1998 we follow the
Nationwide Invest Direct Account. This is the closest equivalent account offered by the
Nationwide Building Society (which is now the largest remaining building society in the
UK); the difference is that it is operated by post. We consider this type of postal account to
be more representative of building society returns than the branch operated passbook
accounts, which are more in the nature of a cash-based transaction account.

US asset returns
The US indices used in this study were provided by the Center for Research in Security
Prices (CRSP) at the Graduate School of Business of the University of Chicago. The
value-weighted equity index covers all common stocks trading on the New York,
Nasdaq, and Arca Stock Exchanges, excluding ADRs. For the bond index, the CRSP has
used software which selects the bond that is closest to a 20-year bond in each month.
The same methodology has been employed for the 30-day T-Bill.
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Total returns
In this study, we have shown the performance of representative investments in UK
equities and long gilts, with additional analysis of equivalent US returns in both
monetary and real (inflation adjusted) terms. The total returns to the investor, however,
also include the income on the investment. This is important throughout the study for
comparability between asset classes. For example, when constructing an index for a
cash investment such as the UK Treasury Bill Index, the 100 invested at the end of
1899 grew to approximately 104 by the end of the following year. This full amount is
reinvested and by the end of 1920 the value of this investment had grown to about
190. In contrast, equity and bond market returns can be split into two components:
capital appreciation; and dividend income. The most commonly quoted stock market
indices usually include only the capital component of the return. In order to calculate
returns on a comparable basis, we need to include the returns obtained by reinvesting
this income. This is particularly important in looking at bonds where the scope for
capital appreciation is small, so almost all of the return will be from income. In this
study, total returns are calculated assuming income is reinvested at the end of the year.

Taxation
The total return to an investor depends crucially on the tax regime. The largest longterm investors in the British equity and gilt markets are pension funds and similar
institutions that (until the abolition of the advance corporation tax (ACT) credit) have
not suffered tax on their income or capital; our main tables therefore make no
allowance for tax until 1998, which was the first full year that non-taxpayers were
unable to reclaim the ACT credit. This effectively reduced the dividend yield to nontaxpayers, and is reflected in our main tables and gross total return series.
The personal investor must suffer tax. The net return to a building society account is
straightforward to compute. However, changes in the tax regime in recent years make
the net return to equity and gilt investment less straightforward to calculate on a
consistent basis. For example, the change to total return taxation for gilts means that it
is inappropriate to calculate a net total return on the basis of taxing income alone. Thus
returns are quoted gross throughout, but for reference we also quote basic tax rates.

Arithmetic and geometric averages


Our analysis of past data usually relies on calculations of the geometric mean for each
series. Arithmetic averages can provide a misleading picture. For example, suppose
equities rose from a base of 100 to 200 over one year and then fell back to 100 over the
next year. The return for year one would have been 100% and for year two minus 50%.
The arithmetic average return would be 25% even though equities are actually
unchanged in value over the two years.
The geometric average return in this example would be zero. This method of calculation is
therefore preferable. Over long periods, the geometric average for total returns is the rate at
which a sum invested at the beginning of the period will grow to by the end of the period,
assuming all income is reinvested. The calculation of geometric averages depends only on
the initial and final values for the investment, not particular values at any other point in time.
For periods of one year, arithmetic and geometric averages will be the same. But over
longer periods the geometric average is always less than the arithmetic average, except
when all the individual yearly returns are the same. For the mathematically minded, the
geometric return is approximately equal to the arithmetic return minus one-half the
variance of the arithmetic return.
Although geometric returns are appropriate to analyse the past, arithmetic returns
should be used to provide forecasts. Arithmetic averages provide the better unbiased
estimator of returns (for a statistical proof of this see Ian Coopers paper Arithmetic vs
Geometric Premium: setting discount rates for capital budgeting calculations, IFA
Working Paper 174-93, April 1993).
13 February 2014

109

Barclays | Equity Gilt Study

Capital value indices


The indices in Figure 2 show the nominal capital value of 100 invested in equities and
gilts at the end of 1899. The chart also plots the Barclays Cost of Living Index. Note how
the equity index has correlated with increases in the cost of living versus a similar
investment in gilts. The index values at the end of 2013 were 14,915 for equities, 51.8
for gilts, and 7803 for the cost of living.
We then show the same capital indices adjusted for the increase in the cost of living since
1899. Figure 3 shows the end-2013 real equity price index at 191 with the real gilt price
index at 0.66.

Total return indices


The next two charts show the nominal and real value of the equity, gilt and cash funds
with gross income received reinvested at the end of each year since 1899. Figure 4 shows
that the nominal worth of 100 invested in equities at the end of 1899 was 2,214,856.
The same investment in gilts was worth 30,591 and in T-Bills 20,363. When adjusted
for inflation, the equity fund is worth 28,386, the gilt 392 and the cash fund 261.

FIGURE 2
Barclays price indices in nominal terms

FIGURE 3
Barclays price indices in real terms
300

100000

250

10000

200

1000

150
100

Equities

Gilts

Retail Prices

Equities

2009

1999

1989

1979

1969

1959

1949

1939

1929

1919

1899

2009

1999

1989

1979

1969

1959

1949

1939

1929

0
1919

1
1909

50

1899

10

1909

100

Gilts

Source: Barclays Research

Source: Barclays Research

FIGURE 4
Barclays total return indices in nominal terms with gross
income reinvested

FIGURE 5
Barclays total return indices in real terms with gross
income reinvested

10,000,000

100,000
10,000
1,000

10,000
100
10

Source: Barclays Research

13 February 2014

Gilts

T-Bills

Equities

Gilts

2009

1999

1989

1979

1969

1959

1949

1939

1929

1919

1909

2009

1999

1989

1979

1969

1959

1949

1939

1929

1919

1909

1899

Equities

1899

10

T- Bills

Source: Barclays Research

110

Barclays | Equity Gilt Study

FIGURE 6
Barclays UK Cost of Living Index
Change %
Year
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956

13 February 2014

December
(1899=100)
103.3
103.3
106.7
106.7
106.7
106.7
100.0
110.0
113.3
113.3
113.3
116.7
120.0
120.0
120.0
148.3
175.8
212.5
244.7
250.3
299.2
221.4
200.2
196.9
201.3
196.9
199.1
188.0
186.9
185.8
172.4
164.6
159.1
159.1
160.2
163.5
168.0
178.0
173.5
192.4
216.9
223.6
222.5
221.4
223.6
225.8
226.9
234.2
245.7
254.3
262.4
294.0
312.7
316.0
328.5
347.7
358.3

In year
3.3
0.0
3.2
0.0
0.0
0.0
-6.2
10.0
3.0
0.0
0.0
2.9
2.9
0.0
0.0
23.6
18.5
20.9
15.2
2.3
19.6
-26.0
-9.5
-1.7
2.3
-2.2
1.1
-5.6
-0.6
-0.6
-7.2
-4.5
-3.4
0.0
0.7
2.1
2.7
6.0
-2.5
10.9
12.7
3.1
-0.5
-0.5
1.0
1.0
0.5
3.2
4.9
3.5
3.2
12.0
6.3
1.1
4.0
5.8
3.0

5y average

1.3
0.6
-0.7
0.6
1.2
1.2
1.2
3.1
1.8
1.1
1.1
5.5
8.6
12.1
15.3
15.8
15.1
4.7
-1.2
-4.3
-4.3
-8.0
-2.1
-1.3
-1.0
-1.6
-2.6
-3.7
-3.3
-3.2
-2.9
-1.1
0.4
2.3
1.8
3.7
5.8
5.9
4.6
5.0
3.0
0.8
0.3
1.0
2.1
2.6
3.0
5.3
6.0
5.2
5.3
5.8
4.0

Change %
Year
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

December
374.9
381.8
381.8
388.7
405.7
416.5
424.2
444.6
464.5
481.6
493.4
522.7
547.1
590.3
643.6
692.9
766.2
912.8
1140.0
1311.8
1471.1
1594.4
1869.3
2151.9
2411.2
2541.6
2676.7
2799.3
2958.5
3068.6
3182.0
3397.6
3659.5
4001.4
4180.0
4287.8
4369.3
4495.6
4640.3
4754.2
4926.6
5062.1
5151.4
5302.3
5339.2
5496.3
5650.2
5847.3
5976.6
6241.4
6493.9
6561.7
6712.5
7032.8
7371.5
7599.3
7802.6

In year
4.6
1.8
0.0
1.8
4.4
2.6
1.9
4.8
4.5
3.7
2.5
5.9
4.7
7.9
9.0
7.7
10.6
19.1
24.9
15.1
12.1
8.4
17.2
15.1
12.0
5.4
5.3
4.6
5.7
3.7
3.7
6.8
7.7
9.3
4.5
2.6
1.9
2.9
3.2
2.5
3.6
2.8
1.8
2.9
0.7
2.9
2.8
3.5
2.2
4.4
4.0
1.0
2.3
4.8
4.8
3.1
2.7

5y average
3.7
3.9
3.1
2.3
2.5
2.1
2.1
3.1
3.6
3.5
3.4
4.3
4.2
4.9
6.0
7.0
7.9
10.8
14.1
15.3
16.3
15.8
15.4
13.5
12.9
11.6
10.9
8.4
6.6
4.9
4.6
4.9
5.5
6.2
6.4
6.1
5.2
4.2
3.0
2.6
2.8
3.0
2.8
2.7
2.3
2.2
2.2
2.6
2.4
3.2
3.4
3.0
2.8
3.3
3.4
3.2
3.5

111

Barclays | Equity Gilt Study

FIGURE 7
Barclays UK Equity Index

Year
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955

Equity Price Index


December
100
108
100
101
98
106
105
112
107
108
115
112
109
108
100
96
96
89
93
108
116
86
80
96
92
106
117
119
124
139
113
102
77
99
119
131
144
166
138
118
114
102
119
135
144
156
160
182
170
157
141
149
153
144
170
242
256

13 February 2014

+8.3%
-7.9%
+1.3%
-2.7%
+8.0%
-0.7%
+6.1%
-4.7%
+1.3%
+6.3%
-2.1%
-2.9%
-1.4%
-7.1%
-4.4%
0.0%
-6.8%
+4.2%
+16.3%
+7.7%
-25.6%
-7.1%
+19.8%
-4.0%
+15.3%
+9.9%
+1.8%
+4.0%
+12.2%
-19.1%
-9.2%
-24.3%
+27.9%
+20.6%
+9.8%
+9.9%
+15.1%
-16.7%
-14.9%
-3.1%
-10.2%
+16.8%
+12.9%
+7.1%
+8.3%
+2.0%
+13.9%
-6.3%
-7.7%
-10.3%
+5.6%
+3.0%
-5.9%
+17.8%
+42.4%
+5.8%

Equity Income Index


December

Income
yield %

100
69
80
66
62
71
77
79
57
73
69
71
69
57
57
36
67
66
63
34
77
79
73
72
67
73
83
76
79
90
80
65
64
60
70
78
82
93
94
90
94
91
86
86
87
88
93
107
98
103
109
121
128
134
155
179

6.3
4.8
5.4
4.6
4.0
4.6
4.7
5.1
3.6
4.3
4.2
4.4
4.4
3.9
4.1
2.6
5.2
4.8
4.0
2.0
6.1
6.7
5.2
5.3
4.3
4.3
4.8
4.2
3.9
5.5
5.4
5.8
4.4
3.5
3.6
3.7
3.4
4.6
5.5
5.4
6.3
5.2
4.4
4.1
3.8
3.8
3.5
4.3
4.3
5.0
5.0
5.4
6.1
5.4
4.4
4.8

-30.6%
+15.6%
-17.3%
-6.1%
+13.7%
+8.5%
+2.9%
-27.4%
+26.5%
-4.5%
+2.1%
-3.2%
-16.5%
+0.1%
-37.8%
+88.2%
-2.2%
-3.6%
-47.0%
+128.9%
+2.7%
-7.9%
-0.8%
-7.5%
+10.3%
+12.5%
-8.2%
+3.9%
+14.9%
-11.0%
-18.7%
-2.4%
-5.6%
+15.7%
+11.5%
+5.8%
+12.7%
+1.8%
-4.8%
+4.8%
-3.6%
-4.5%
-0.2%
+0.4%
+2.0%
+4.9%
+15.1%
-7.7%
+4.4%
+5.6%
+11.2%
+6.3%
+4.3%
+16.0%
+15.4%

Equity Price Index


adjusted for
Cost of Living
100
105
97
95
92
100
99
112
97
95
101
99
94
90
83
80
64
51
44
44
46
29
36
48
47
53
59
60
66
74
61
59
47
62
75
82
88
99
78
68
59
47
53
61
65
70
71
80
73
64
55
57
52
46
54
74
74

+4.8%
-7.9%
-1.9%
-2.7%
+8.0%
-0.7%
+13.2%
-13.3%
-1.7%
+6.3%
-2.1%
-5.7%
-4.2%
-7.1%
-4.4%
-19.1%
-21.4%
-13.8%
+1.0%
+5.3%
-37.8%
+25.5%
+32.5%
-2.4%
+12.8%
+12.4%
+0.7%
+10.1%
+12.9%
-18.6%
-2.1%
-20.8%
+32.4%
+20.6%
+9.0%
+7.7%
+12.1%
-21.4%
-12.7%
-12.6%
-20.3%
+13.3%
+13.4%
+7.7%
+7.3%
+1.0%
+13.3%
-9.2%
-12.1%
-13.3%
+2.3%
-8.1%
-11.5%
+16.6%
+36.9%
-0.0%

Equity Income Index


adjusted for
Cost of Living
100
69
78
64
60
69
79
74
52
66
63
63
59
49
49
25
39
32
27
14
26
37
37
38
34
39
43
42
44
50
48
41
41
39
45
49
51
54
56
48
45
42
40
40
40
40
42
47
41
42
43
42
42
44
49
53

-30.6%
+11.9%
-17.3%
-6.1%
+13.7%
+15.7%
-6.4%
-29.5%
+26.5%
-4.5%
-0.8%
-5.8%
-16.5%
+0.1%
-49.7%
+58.8%
-19.1%
-16.3%
-48.2%
+91.4%
+38.8%
+1.8%
+0.9%
-9.5%
+12.7%
+11.2%
-2.8%
+4.5%
+15.6%
-4.2%
-14.8%
+1.0%
-5.6%
+14.9%
+9.2%
+3.0%
+6.4%
+4.4%
-14.2%
-7.1%
-6.5%
-4.0%
+0.3%
-0.6%
+1.0%
+4.4%
+11.6%
-12.1%
+0.8%
+2.3%
-0.7%
-0.0%
+3.2%
+11.6%
+9.1%

112

Barclays | Equity Gilt Study

Year
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

Equity Price Index


December
220
205
289
432
421
409
391
450
405
428
389
500
718
609
563
799
901
619
276
653
628
886
910
949
1206
1294
1579
1944
2450
2822
3452
3596
3829
4978
4265
4907
5635
6951
6286
7450
8320
9962
11048
13396
12329
10428
7825
9121
9961
11764
13311
13580
9129
11407
12655
11808
12782
14915

13 February 2014

-13.9%
-7.0%
+41.1%
+49.5%
-2.6%
-3.0%
-4.4%
+15.2%
-10.0%
+5.9%
-9.3%
+28.7%
+43.5%
-15.2%
-7.5%
+41.9%
+12.8%
-31.4%
-55.3%
+136.3%
-3.9%
+41.2%
+2.7%
+4.3%
+27.1%
+7.2%
+22.1%
+23.1%
+26.0%
+15.2%
+22.3%
+4.2%
+6.5%
+30.0%
-14.3%
+15.1%
+14.8%
+23.3%
-9.6%
+18.5%
+11.7%
+19.7%
+10.9%
+21.2%
-8.0%
-15.4%
-25.0%
+16.6%
+9.2%
+18.1%
+13.2%
+2.0%
-32.8%
+25.0%
+10.9%
-6.7%
+8.2%
+16.7%

Equity Income Index


December
183
188
202
227
276
286
285
266
303
326
328
319
339
342
360
379
414
430
472
521
588
682
768
951
1073
1111
1211
1309
1578
1781
2033
2264
2628
3076
3401
3591
3573
3414
3684
4127
4536
4690
4026
4140
4007
3998
4049
4121
4428
5058
5549
5978
5974
5321
5331
6059
6651
7131

+2.2%
+2.8%
+7.5%
+12.1%
+21.7%
+3.5%
-0.4%
-6.5%
+13.7%
+7.7%
+0.5%
-2.5%
+6.1%
+0.8%
+5.5%
+5.1%
+9.3%
+3.9%
+9.6%
+10.4%
+12.8%
+16.1%
+12.6%
+23.8%
+12.8%
+3.5%
+9.0%
+8.1%
+20.6%
+12.8%
+14.1%
+11.4%
+16.1%
+17.0%
+10.5%
+5.6%
-0.5%
-4.4%
+7.9%
+12.0%
+9.9%
+3.4%
-14.2%
+2.8%
-3.2%
-0.2%
+1.3%
+1.8%
+7.5%
+14.2%
+9.7%
+7.7%
-0.1%
-10.9%
+0.2%
+13.6%
+9.8%
+7.2%

Income
yield %
5.7
6.3
4.8
3.6
4.5
4.8
5.0
4.1
5.1
5.2
5.8
4.4
3.2
3.9
4.4
3.3
3.2
4.8
11.7
5.5
6.4
5.3
5.8
6.9
6.1
5.9
5.3
4.6
4.4
4.3
4.0
4.3
4.7
4.2
5.5
5.0
4.4
3.4
4.0
3.8
3.7
3.2
2.5
2.1
2.2
2.6
3.6
3.1
3.1
3.0
2.9
3.0
4.5
3.2
2.9
3.5
3.6
3.3

Equity Price Index


adjusted for
Cost of Living
62
55
76
113
108
101
94
106
91
92
81
101
137
111
95
124
130
81
30
57
48
60
57
51
56
54
62
73
88
95
112
113
113
136
107
117
131
159
140
161
175
202
218
260
233
195
142
161
170
197
213
209
139
170
180
160
168
191

-16.5%
-11.1%
+38.5%
+49.5%
-4.4%
-7.0%
-6.9%
+13.1%
-14.2%
+1.3%
-12.5%
+25.6%
+35.4%
-19.0%
-14.3%
+30.2%
+4.8%
-37.9%
-62.5%
+89.2%
-16.5%
+25.9%
-5.3%
-11.0%
+10.4%
-4.3%
+15.8%
+16.9%
+20.5%
+9.0%
+17.9%
+0.4%
-0.3%
+20.7%
-21.6%
+10.1%
+11.9%
+21.0%
-12.1%
+14.8%
+9.0%
+15.5%
+7.9%
+19.1%
-10.6%
-16.0%
-27.1%
+13.4%
+5.5%
+15.5%
+8.3%
-1.9%
-33.4%
+22.0%
+5.9%
-11.0%
+5.0%
+13.6%

Equity Income Index


adjusted for
Cost of Living
53
52
55
61
73
73
71
65
70
73
70
67
67
65
63
61
62
58
53
47
46
48
50
53
52
48
49
51
58
62
68
74
80
87
88
89
86
81
85
92
99
98
82
83
78
77
76
75
78
87
92
95
94
82
78
85
90
94

-0.8%
-1.7%
+5.5%
+12.1%
+19.5%
-0.8%
-3.0%
-8.2%
+8.5%
+3.1%
-3.1%
-4.8%
+0.2%
-3.7%
-2.3%
-3.6%
+1.6%
-6.0%
-8.0%
-11.6%
-2.0%
+3.5%
+3.9%
+5.6%
-2.0%
-7.6%
+3.4%
+2.7%
+15.3%
+6.8%
+10.0%
+7.4%
+8.7%
+8.7%
+1.1%
+1.1%
-3.0%
-6.2%
+4.9%
+8.5%
+7.3%
-0.2%
-16.5%
+1.0%
-5.9%
-0.9%
-1.6%
-1.0%
+3.8%
+11.8%
+5.0%
+3.5%
-1.0%
-13.0%
-4.4%
+8.4%
+6.5%
+4.4%

113

Barclays | Equity Gilt Study

FIGURE 8
Barclays UK Gilt Index
Gilt Price Index
December

Year
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956

13 February 2014

100.0
98.4
94.6
93.7
88.3
89.4
90.1
86.6
84.1
84.6
83.6
80.0
77.7
75.8
72.3
73.0
73.0
55.7
54.9
59.4
51.9
45.6
50.6
56.2
56.1
57.7
55.4
54.5
55.9
56.7
53.3
57.8
55.0
74.7
74.6
92.8
87.4
85.1
74.8
70.7
68.9
77.4
83.1
82.9
80.0
82.1
91.8
99.2
82.5
80.6
70.9
71.3
61.9
59.0
64.7
66.1
56.9
52.7

-1.6%
-3.8%
-0.9%
-5.8%
+1.2%
+0.8%
-3.8%
-2.9%
+0.6%
-1.3%
-4.3%
-2.8%
-2.4%
-4.7%
+1.0%
0.0
-23.8%
-1.4%
+8.3%
-12.7%
-12.1%
+11.1%
+10.9%
-0.2%
+2.9%
-3.9%
-1.6%
+2.6%
+1.3%
-6.0%
+8.5%
-4.7%
+35.6%
-0.1%
+24.4%
-5.8%
-2.6%
-12.2%
-5.4%
-2.6%
+12.3%
+7.4%
-0.3%
-3.4%
+2.6%
+11.8%
+8.0%
-16.8%
-2.3%
-12.0%
+0.5%
-13.1%
-4.8%
+9.7%
+2.2%
-13.8%
-7.5%

Yield %
2.8
2.9
3.0
2.9
2.8
2.8
2.9
3.0
3.0
3.0
3.1
3.2
3.3
3.5
3.4
3.4
4.5
4.6
4.2
4.8
5.5
4.9
4.4
4.5
4.3
4.5
4.6
4.5
4.4
4.7
4.3
4.5
3.3
3.3
2.7
2.9
2.9
3.3
3.5
3.6
3.2
3.0
3.0
3.1
3.0
2.7
2.5
3.0
3.1
3.5
3.5
4.0
4.2
3.9
3.8
4.4
4.7

Gilt Price Index


Adjusted for Cost of Living
100.0
95.2
91.5
87.8
82.8
83.8
84.4
86.6
76.5
74.7
73.7
70.6
66.6
63.2
60.2
60.9
49.2
31.7
25.8
24.3
20.7
15.2
22.9
28.1
28.5
28.6
28.1
27.4
29.8
30.3
28.7
33.5
33.4
46.9
46.9
57.9
53.4
50.7
42.0
40.8
35.8
35.7
37.2
37.2
36.1
36.7
40.6
43.7
35.2
32.8
27.9
27.2
21.1
18.9
20.5
20.1
16.4
14.7

-4.8%
-3.8%
-4.0%
-5.8%
+1.2%
+0.8%
+2.6%
-11.7%
-2.4%
-1.3%
-4.3%
-5.6%
-5.1%
-4.7%
+1.0%
-19.1%
-35.7%
-18.4%
-6.0%
-14.6%
-26.5%
+50.2%
+22.6%
+1.5%
+0.6%
-1.7%
-2.7%
+8.7%
+1.9%
-5.4%
+16.9%
-0.2%
+40.4%
-0.1%
+23.5%
-7.8%
-5.2%
-17.1%
-3.0%
-12.2%
-0.3%
+4.2%
+0.2%
-3.0%
+1.6%
+10.7%
+7.5%
-19.4%
-6.9%
-15.0%
-2.6%
-22.4%
-10.5%
+8.5%
-1.7%
-18.6%
-10.2%

114

Barclays | Equity Gilt Study


Gilt Price Index
December

Year
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

13 February 2014

46.9
52.4
50.4
44.3
38.3
45.3
44.5
41.0
40.3
39.5
37.9
34.4
31.7
30.1
35.4
31.0
25.3
18.3
21.8
21.6
28.2
24.4
22.2
23.5
20.7
28.2
29.5
28.5
28.7
28.8
30.6
30.6
29.4
28.1
30.4
33.0
39.4
32.2
35.5
35.7
40.0
47.4
43.4
45.2
43.4
45.5
44.1
45.2
47.0
44.8
45.1
48.8
46.4
48.7
57.2
57.9
51.8

-10.9%
+11.7%
-3.9%
-11.9%
-13.7%
+18.3%
-1.7%
-7.9%
-1.7%
-2.1%
-4.1%
-9.3%
-7.6%
-5.2%
+17.6%
-12.3%
-18.6%
-27.5%
+19.2%
-1.1%
+30.6%
-13.3%
-9.2%
+6.2%
-12.1%
+36.2%
+4.9%
-3.4%
+0.4%
+0.4%
+6.2%
+0.0%
-3.7%
-4.5%
+8.0%
+8.7%
+19.3%
-18.1%
+10.3%
+0.6%
+11.8%
+18.6%
-8.4%
+4.0%
-3.8%
+4.8%
-3.2%
+2.5%
+3.9%
-4.6%
+0.6%
+8.3%
-5.0%
+5.0%
+17.4%
+1.3%
-10.6%

Yield %
5.3
4.8
5.0
5.6
6.5
5.4
5.5
6.1
6.2
6.4
6.9
7.6
8.5
9.3
8.3
9.6
11.9
17.0
14.8
15.0
10.9
13.2
14.7
13.9
15.8
11.1
10.5
10.6
10.5
10.5
9.5
9.3
10.0
10.6
9.8
8.7
6.4
8.6
7.6
7.6
6.3
4.4
5.3
4.7
5.0
4.4
4.7
4.5
4.1
4.7
4.5
3.4
4.2
3.6
2.4
2.2
3.3

Gilt Price Index


Adjusted for Cost of Living
12.5
13.7
13.2
11.4
9.4
10.9
10.5
9.2
8.7
8.2
7.7
6.6
5.8
5.1
5.5
4.5
3.3
2.0
1.9
1.6
1.9
1.5
1.2
1.1
0.9
1.1
1.1
1.0
1.0
0.9
1.0
0.9
0.8
0.7
0.7
0.8
0.9
0.7
0.8
0.8
0.8
0.9
0.8
0.9
0.8
0.8
0.8
0.8
0.8
0.7
0.7
0.7
0.7
0.7
0.8
0.8
0.7

-14.9%
+9.6%
-3.9%
-13.5%
-17.3%
+15.3%
-3.5%
-12.1%
-6.0%
-5.5%
-6.4%
-14.4%
-11.7%
-12.2%
+7.8%
-18.5%
-26.4%
-39.2%
-4.6%
-14.0%
+16.4%
-20.0%
-22.6%
-7.8%
-21.6%
+29.2%
-0.4%
-7.7%
-5.0%
-3.2%
+2.4%
-6.3%
-10.6%
-12.7%
+3.4%
+6.0%
+17.1%
-20.4%
+6.8%
-1.8%
+7.9%
+15.4%
-10.0%
+1.0%
-4.5%
+1.8%
-5.8%
-1.0%
+1.7%
-8.6%
-3.3%
+7.3%
-7.3%
+0.3%
+12.0%
-1.7%
-12.9%

115

Barclays | Equity Gilt Study


FIGURE 9
Barclays UK Treasury Bill Index
Year
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956

13 February 2014

Treasury Bill Index


December
100
104
107
110
114
117
119
123
128
130
133
137
141
144
148
153
158
162
167
172
179
190
199
204
210
217
226
237
247
257
271
278
289
293
295
297
298
300
302
304
308
311
314
317
320
324
327
328
330
332
333
335
337
344
352
359
371
390

+4.0%
+2.5%
+3.0%
+3.4%
+2.9%
+2.2%
+3.0%
+3.8%
+2.2%
+2.1%
+3.1%
+2.8%
+2.0%
+3.0%
+3.0%
+3.0%
+3.0%
+3.0%
+3.0%
+3.6%
+6.5%
+4.7%
+2.6%
+2.7%
+3.5%
+4.2%
+4.6%
+4.4%
+4.3%
+5.4%
+2.5%
+3.7%
+1.5%
+0.6%
+0.7%
+0.5%
+0.6%
+0.6%
+0.6%
+1.3%
+1.0%
+1.0%
+2.0%
+1.0%
+1.0%
+0.9%
+0.5%
+0.5%
+0.5%
+0.5%
+0.5%
+0.5%
+2.1%
+2.4%
+1.9%
+3.5%
+5.0%

Treasury Bill Index


adjusted for cost of living
100
101
103
103
106
110
112
123
116
115
118
121
121
120
124
127
106
92
79
70
71
64
90
102
107
108
115
119
131
138
146
161
175
184
185
185
182
179
170
175
160
143
140
143
145
145
145
145
141
135
131
128
115
110
111
109
107
109

+0.6%
+2.5%
-0.3%
+3.4%
+2.9%
+2.2%
+9.9%
-5.7%
-0.8%
+2.1%
+3.1%
-0.1%
-0.8%
+3.0%
+3.0%
-16.6%
-13.1%
-14.7%
-10.5%
+1.3%
-11.0%
+41.5%
+13.4%
+4.4%
+1.2%
+6.6%
+3.5%
+10.5%
+4.9%
+6.1%
+10.5%
+8.6%
+5.0%
+0.6%
+0.0%
-1.5%
-2.1%
-5.1%
+3.2%
-8.6%
-10.4%
-2.0%
+1.5%
+1.5%
+0.0%
-0.1%
+0.0%
-2.6%
-4.2%
-2.9%
-2.6%
-10.3%
-4.0%
+1.3%
-2.0%
-2.2%
+1.9%

116

Barclays | Equity Gilt Study

Year
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

13 February 2014

Treasury Bill Index


December
409
430
445
467
491
513
533
556
591
627
664
714
770
828
879
927
1010
1137
1259
1402
1534
1658
1881
2204
2507
2817
3103
3399
3803
4219
4624
5133
5880
6812
7602
8322
8810
9286
9911
10522
11246
12137
12805
13601
14349
14939
15500
16211
17022
17856
18903
19891
20026
20126
20228
20294
20363

+5.0%
+5.1%
+3.4%
+5.0%
+5.1%
+4.5%
+3.8%
+4.4%
+6.3%
+6.1%
+5.9%
+7.4%
+7.9%
+7.5%
+6.2%
+5.4%
+9.0%
+12.6%
+10.8%
+11.3%
+9.4%
+8.1%
+13.5%
+17.2%
+13.8%
+12.4%
+10.1%
+9.5%
+11.9%
+10.9%
+9.6%
+11.0%
+14.6%
+15.9%
+11.6%
+9.5%
+5.9%
+5.4%
+6.7%
+6.2%
+6.9%
+7.9%
+5.5%
+6.2%
+5.5%
+4.1%
+3.8%
+4.6%
+5.0%
+4.9%
+5.9%
+5.2%
+0.7%
+0.5%
+0.5%
+0.3%
+0.3%

Treasury Bill Index


adjusted for cost of living
109
113
117
120
121
123
126
125
127
130
135
137
141
140
137
134
132
125
110
107
104
104
101
102
104
111
116
121
129
137
145
151
161
170
182
194
202
207
214
221
228
240
249
257
269
272
274
277
285
286
291
303
298
286
274
267
261

+0.4%
+3.2%
+3.4%
+3.2%
+0.7%
+1.8%
+1.9%
-0.4%
+1.7%
+2.4%
+3.4%
+1.4%
+3.1%
-0.4%
-2.6%
-2.1%
-1.4%
-5.5%
-11.3%
-3.2%
-2.4%
-0.3%
-3.2%
+1.8%
+1.5%
+6.6%
+4.6%
+4.8%
+5.8%
+7.0%
+5.7%
+4.0%
+6.4%
+6.0%
+6.8%
+6.7%
+3.9%
+2.4%
+3.4%
+3.6%
+3.1%
+5.0%
+3.7%
+3.2%
+4.8%
+1.1%
+0.9%
+1.1%
+2.7%
+0.4%
+1.8%
+4.2%
-1.7%
-4.1%
-4.1%
-2.7%
-2.3%

117

Barclays | Equity Gilt Study

FIGURE 10
Barclays UK Index-linked Gilt Index
Year

Index Linked Gilt


Price Index December

Real
yield %

Money
yield %

Index Linked Gilt Price Index


adjusted for Cost of Living

1982

100

1983

98.1

-1.9%

1984

101.6

+3.6%

3.3

8.1

92.3

-1.0%

1985

98.5

-3.1%

3.9

9.8

84.6

-8.3%

1986

101.4

+3.0%

4.1

7.9

84.0

-0.7%

1987

105.1

+3.6%

4.0

7.9

84.0

-0.1%

1988

116.0

+10.4%

3.8

10.8

86.8

+3.3%

1989

129.1

+11.3%

3.5

11.5

89.7

+3.3%

1990

130.8

+1.3%

4.0

13.8

83.1

-7.4%

1991

133.2

+1.8%

4.5

9.2

81.0

-2.5%

1992

151.1

+13.4%

3.9

6.6

89.6

+10.6%

1993

177.1

+17.2%

2.9

4.9

103.0

+15.0%

1994

158.3

-10.6%

4.0

7.0

89.5

-13.1%

1995

171.1

+8.1%

3.6

6.9

93.7

+4.7%

1996

176.2

+3.0%

3.6

6.1

94.2

+0.5%

1997

193.4

+9.8%

3.1

6.9

99.8

+5.9%

1998

227.4

+17.6%

2.0

4.8

114.2

+14.4%

1999

233.7

+2.8%

2.2

4.0

115.3

+1.0%

2000

235.4

+0.8%

2.3

5.3

112.9

-2.1%

2.7

8.3

100

3.2

8.7

93.2

-6.8%

2001

227.7

-3.3%

2.7

3.4

108.4

-4.0%

2002

240.7

+5.7%

2.1

5.1

111.3

+2.7%

2003

251.9

+4.7%

1.7

4.5

113.3

+1.8%

2004

267.6

+6.3%

1.7

5.3

116.3

+2.7%

2005

286.7

+7.1%

1.5

3.8

121.9

+4.8%

2006

287.0

+0.1%

1.6

6.0

116.9

-4.1%

2007

297.9

+3.8%

1.4

5.5

116.6

-0.3%

2008

290.3

-2.5%

1.4

2.3

112.5

-3.5%

2009

302.5

+4.2%

0.8

3.2

114.5

+1.8%

2010

328.3

+8.5%

0.4

5.2

118.6

+3.6%

2011

369.5

+12.5%

-0.5

4.2

127.4

+7.4%

2012

363.6

-1.6%

-0.5

2.6

121.6

-4.5%

2013

355.7

-2.2%

-0.2

2.5

115.9

-4.7%

13 February 2014

118

Barclays | Equity Gilt Study

FIGURE 11
Barclays UK Equity, Gilt and Treasury Bill Funds
Equities
Year
1945

Value of Fund
December
100

Gilts

Adjusted for Cost


of Living
100

Value of Fund
December
100

Treasury Bills

Adjusted for Cost


of Living
100

Value of Fund
December
100

Adjusted for Cost


of Living
100

1946

118

+17.9%

117

+17.3%

111

+10.7%

110

+10.2%

101

+0.5%

100

+0.0%

1947

115

-2.3%

111

-5.3%

95

-14.3%

92

-16.9%

101

+0.5%

97

-2.6%

1948

111

-3.8%

102

-8.3%

96

+0.7%

88

-4.0%

102

+0.5%

93

-4.2%

1949

104

-5.8%

93

-8.9%

87

-8.9%

77

-12.0%

102

+0.5%

91

-2.9%

1950

116

+10.9%

100

+7.4%

91

+4.0%

78

+0.8%

103

+0.5%

88

-2.6%

1951

126

+8.5%

97

-3.1%

82

-9.6%

63

-19.3%

103

+0.5%

79

-10.3%

1952

126

-0.1%

91

-6.1%

81

-0.8%

59

-6.7%

105

+2.1%

76

-4.0%

1953

156

+24.2%

111

+22.9%

93

+14.0%

66

+12.8%

108

+2.4%

77

+1.3%

1954

232

+48.6%

159

+42.9%

98

+6.1%

67

+2.0%

110

+1.9%

75

-2.0%

1955

257

+10.9%

167

+4.8%

88

-10.1%

57

-15.0%

114

+3.5%

74

-2.2%

1956

234

-9.0%

147

-11.7%

85

-3.2%

54

-6.0%

119

+5.0%

75

+1.9%

1957

231

-1.1%

139

-5.5%

80

-6.2%

48

-10.4%

125

+5.0%

75

+0.4%

1958

342

+47.9%

202

+45.2%

94

+17.0%

55

+14.9%

132

+5.1%

78

+3.2%

1959

529

+54.8%

313

+54.8%

95

+0.9%

56

+0.9%

136

+3.4%

81

+3.4%

1960

539

+1.8%

313

-0.1%

88

-7.0%

51

-8.7%

143

+5.0%

83

+3.2%

1961

548

+1.7%

305

-2.5%

81

-8.1%

45

-11.9%

150

+5.1%

84

+0.7%

1962

550

+0.4%

298

-2.2%

101

+24.7%

55

+21.5%

157

+4.5%

85

+1.8%

1963

659

+19.9%

351

+17.7%

105

+3.7%

56

+1.8%

163

+3.8%

87

+1.9%

1964

623

-5.4%

317

-9.8%

102

-2.3%

52

-6.7%

170

+4.4%

87

-0.4%

1965

694

+11.4%

337

+6.6%

107

+4.4%

52

-0.1%

181

+6.3%

88

+1.7%

1966

666

-4.0%

312

-7.4%

111

+4.2%

52

+0.5%

192

+6.1%

90

+2.4%

1967

895

+34.3%

410

+31.1%

114

+2.6%

52

+0.1%

203

+5.9%

93

+3.4%

1968

1326

+48.1%

573

+39.8%

111

-2.4%

48

-7.8%

219

+7.4%

94

+1.4%

1969

1168

-11.9%

482

-15.9%

112

+0.2%

46

-4.2%

236

+7.9%

97

+3.1%

1970

1127

-3.5%

431

-10.5%

116

+3.6%

44

-4.0%

253

+7.5%

97

-0.4%

1971

1652

+46.5%

579

+34.4%

147

+27.3%

52

+16.8%

269

+6.2%

94

-2.6%

1972

1922

+16.4%

626

+8.1%

142

-3.8%

46

-10.7%

284

+5.4%

92

-2.1%

1973

1382

-28.1%

407

-35.0%

129

-8.9%

38

-17.6%

309

+9.0%

91

-1.4%

1974

690

-50.1%

171

-58.1%

109

-15.2%

27

-28.8%

348

+12.6%

86

-5.5%

1975

1719

+149.3%

341

+99.6%

150

+36.8%

30

+9.5%

386

+10.8%

76

-11.3%

1976

1759

+2.3%

303

-11.1%

170

+13.7%

29

-1.1%

429

+11.3%

74

-3.2%

1977

2614

+48.6%

401

+32.5%

247

+44.8%

38

+29.1%

470

+9.4%

72

-2.4%

1978

2839

+8.6%

402

+0.2%

242

-1.8%

34

-9.4%

508

+8.1%

72

-0.3%

1979

3165

+11.5%

382

-4.9%

252

+4.1%

30

-11.2%

576

+13.5%

70

-3.2%

1980

4268

+34.8%

448

+17.1%

305

+20.9%

32

+5.0%

675

+17.2%

71

+1.8%

1981

4846

+13.6%

454

+1.3%

310

+1.8%

29

-9.2%

768

+13.8%

72

+1.5%

1982

6227

+28.5%

553

+21.9%

469

+51.3%

42

+43.6%

863

+12.4%

77

+6.6%

1983

8019

+28.8%

676

+22.3%

544

+15.9%

46

+10.0%

950

+10.1%

80

+4.6%

1984

10552

+31.6%

851

+25.8%

581

+6.8%

47

+2.1%

1041

+9.6%

84

+4.8%

1985

12680

+20.2%

968

+13.7%

644

+11.0%

49

+5.0%

1165

+11.9%

89

+5.8%

1986

16139

+27.3%

1188

+22.7%

715

+11.0%

53

+7.0%

1292

+10.9%

95

+7.0%

1987

17536

+8.7%

1244

+4.8%

831

+16.3%

59

+12.1%

1416

+9.6%

100

+5.7%

1988

19552

+11.5%

1299

+4.4%

909

+9.4%

60

+2.4%

1572

+11.0%

104

+4.0%

1989

26498

+35.5%

1635

+25.8%

963

+5.9%

59

-1.7%

1801

+14.6%

111

+6.4%

13 February 2014

119

Barclays | Equity Gilt Study


Equities
Year

Value of Fund
December

Gilts

Adjusted for Cost


of Living

Value of Fund
December

Treasury Bills

Adjusted for Cost


of Living

Value of Fund
December

Adjusted for Cost


of Living

1990

23947

-9.6%

1351

-17.4%

1017

+5.6%

57

-3.4%

2086

+15.9%

118

+6.0%

1991

28936

+20.8%

1563

+15.7%

1209

+18.9%

65

+13.8%

2328

+11.6%

126

+6.8%

1992

34672

+19.8%

1826

+16.8%

1432

+18.4%

75

+15.4%

2549

+9.5%

134

+6.7%

1993

44207

+27.5%

2285

+25.1%

1844

+28.8%

95

+26.4%

2698

+5.9%

139

+3.9%

1994

41590

-5.9%

2089

-8.6%

1635

-11.3%

82

-13.8%

2844

+5.4%

143

+2.4%

1995

51163

+23.0%

2490

+19.2%

1945

+19.0%

95

+15.3%

3035

+6.7%

148

+3.4%

1996

59275

+15.9%

2815

+13.1%

2095

+7.7%

100

+5.1%

3222

+6.2%

153

+3.6%

1997

73263

+23.6%

3358

+19.3%

2503

+19.4%

115

+15.3%

3444

+6.9%

158

+3.1%

1998

83284

+13.7%

3715

+10.6%

3129

+25.0%

140

+21.7%

3717

+7.9%

166

+5.0%

1999

103120

+23.8%

4520

+21.7%

3018

-3.5%

132

-5.2%

3921

+5.5%

172

+3.7%

2000

97023

-5.9%

4132

-8.6%

3296

+9.2%

140

+6.1%

4165

+6.2%

177

+3.2%

2001

84226

-13.2%

3562

-13.8%

3340

+1.3%

141

+0.6%

4394

+5.5%

186

+4.8%

2002

65440

-22.3%

2689

-24.5%

3668

+9.8%

151

+6.7%

4575

+4.1%

188

+1.1%

2003

+16.9%

3725

+1.6%

149

-1.2%

4747

+3.8%

190

+0.9%

78643

+20.2%

3143

2004

88508

+12.5%

3418

+8.8%

3994

+7.2%

154

+3.6%

4964

+4.6%

192

+1.1%

2005

107609

+21.6%

4066

+18.9%

4329

+8.4%

164

+6.0%

5213

+5.0%

197

+2.7%

2006

125243

+16.4%

4531

+11.4%

4323

-0.1%

156

-4.4%

5468

+4.9%

198

+0.4%

2007

131639

+5.1%

4577

+1.0%

4550

+5.2%

158

+1.2%

5789

+5.9%

201

+1.8%

2008

92460

-29.8%

3185

-30.4%

5135

+12.9%

177

+11.8%

6091

+5.2%

210

+4.2%

2009

119238

+29.0%

4011

+25.9%

5087

-1.0%

171

-3.3%

6133

+0.7%

206

-1.7%

2010

136107

+14.1%

4370

+8.9%

5565

+9.4%

179

+4.4%

6163

+0.5%

198

-4.1%

2011

131469

-3.4%

4027

-7.8%

6755

+21.4%

207

+15.8%

6195

+0.5%

190

-4.1%

2012

147384

+12.1%

4379

+8.7%

7078

+4.8%

210

+1.6%

6215

+0.3%

185

-2.7%

2013

177620

+20.5%

5140

+17.4%

6569

-7.2%

190

-9.6%

6236

+0.3%

180

-2.3%

Note: Original Investment of 100 December 1945, gross income reinvested.

13 February 2014

120

Barclays | Equity Gilt Study


FIGURE 12
Barclays UK Treasury Bills and Building Society Accounts

Year

Building
Basic Rate
Treasury Bills
Society Acc.
Income Tax
Annual
Annual Rate of Calendar Year
Return %
Interest
Average

1946

0.51

6.51

46.25

1947

0.51

6.36

45.00

Year

Basic Rate
Treasury Bills Building Society Income Tax
Annual
Acc. Annual rate Calendar Year
Return %
of Interest
Average

1948

0.51

6.36

45.00

1949

0.52

6.36

45.00

1950

0.52

6.36

45.00

1990

15.86

12.04

25.00

1951

0.52

4.82

46.88

1991

11.59

9.32

25.00

1952

2.09

4.65

47.50

1992

9.47

9.59

24.68

1953

2.36

4.60

45.62

1993

5.86

4.12

24.50

1954

1.89

4.55

45.00

1994

5.40

3.69

20.00

1955

3.50

4.69

43.12

1995

6.74

3.93

20.00

1956

5.02

5.44

42.50

1996

6.16

2.61

20.00

6.88

3.06

20.00

7.92

7.06

20.00

1957

5.01

6.09

42.50

1997

1958

5.11

6.09

42.50

1998

1959

3.42

5.59

39.69

1999

5.51

5.11

23.00

1960

5.04

5.52

38.75

2000

6.22

5.50

22.00

1961

5.14

5.81

38.75

2001

5.50

4.70

22.00

1962

4.46

6.12

38.75

2002

4.12

3.40

22.00

1963

3.80

5.81

38.75

2003

3.75

3.33

22.00

1964

4.40

5.71

38.75

2004

4.59

4.21

22.00

1965

6.29

6.50

40.62

2005

5.00

3.95

22.00

1966

6.12

6.81

41.25

2006

4.90

4.36

22.00

1967

5.90

7.23

41.25

2007

5.87

4.77

22.00

1968

7.43

7.52

41.25

2008

5.23

0.85

20.00

1969

7.93

8.29

41.25

2009

0.68

0.25

20.00

1970

7.45

8.51

41.25

2010

0.50

0.20

20.00

1971

6.18

8.25

39.38

2011

0.51

0.20

20.00

1972

5.42

8.16

38.75

2012

0.32

0.20

20.00

1973

9.01

9.70

32.19

2013

0.34

0.20

20.00

1974

12.56

11.07

32.25

1975

10.75

11.01

34.50

1976

11.34

10.65

35.00

1977

9.44

10.65

34.25

1978

8.06

9.42

33.25

1979

13.45

12.22

30.75

1980

17.17

15.00

30.00

1981

13.76

12.94

30.00

1982

12.38

12.19

30.00

1983

10.14

9.64

30.00

1984

9.55

9.99

30.00

1985

11.87

10.81

30.00

1986

10.95

10.55

29.26

1987

9.58

9.66

27.50

1988

11.01

8.26

25.50

1989

14.55

10.71

25.00

Note:
1. Annual returns on Treasury bills are based on four consecutive investments in 91-day bills.
2. The building society rate of interest above is gross of tax.

13 February 2014

121

Barclays | Equity Gilt Study


FIGURE 13
Barclays Index-linked Funds
Index Linked gilts
Value of Fund December

Adjusted for Cost of Living

1982

100

1983

101

+0.8%

96

-4.3%

1984

107

+6.6%

98

+1.9%

1985

107

-0.2%

92

-5.5%

1986

114

+6.1%

94

+2.3%

1987

122

+6.9%

97

+3.1%

1988

138

+13.7%

103

+6.5%

1989

158

+14.5%

110

+6.3%

1990

165

+4.4%

105

-4.5%

1991

174

+5.2%

106

+0.7%

1992

204

+17.1%

121

+14.1%

1993

247

+21.1%

144

+18.9%

1994

227

-7.9%

128

-10.5%

1995

254

+12.0%

139

+8.5%

1996

271

+6.5%

145

+4.0%

1997

307

+13.4%

158

+9.4%

1998

369

+20.3%

186

+17.1%

1999

388

+5.0%

191

+3.2%

2000

400

+3.1%

192

+0.1%

100

2001

396

-0.9%

189

-1.6%

2002

428

+8.2%

198

+5.1%

2003

457

+6.8%

206

+3.9%

2004

497

+8.6%

216

+4.9%

2005

542

+9.1%

231

+6.7%

2006

554

+2.3%

226

-2.1%

2007

585

+5.5%

229

+1.4%

2008

578

-1.2%

224

-2.1%

2009

610

+5.6%

231

+3.1%

2010

673

+10.3%

243

+5.3%

2011

808

+19.9%

278

+14.4%

2012

834

+3.3%

279

+0.2%

2013

824

-1.3%

268

-3.9%

13 February 2014

122

Barclays | Equity Gilt Study

FIGURE 14
Barclays US Equity Index

Year

Equity Price Index


December

Equity Income Index


December

Income
Yield %

Equity Price Index


Adjusted for Cost of
Living

Equity Income Index


Adjusted for Cost of
Living

1925

100

1926

104

+4.2%

100

5.5

105

+5.4%

100

1927

133

+27.3%

143

+43.3%

6.2

137

+30.2%

146.5985

+46.6%

1928

177

+33.7%

167

+16.4%

5.4

186

+35.2%

172.6287

+17.8%

1929

145

-18.2%

79

-52.4%

3.1

151

-18.6%

81.75549

-52.6%

1930

99

-32.1%

56

-29.3%

3.3

110

-27.4%

61.78934

-24.4%

1931

52

-47.7%

30

-47.1%

3.3

63

-42.3%

36.06677

-41.6%

1932

44

-14.5%

47

+56.7%

6.0

60

-4.7%

62.9825

+74.6%

1933

67

+51.1%

75

+60.6%

6.4

90

+49.9%

100.3819

+59.4%

1934

67

+0.1%

49

-34.7%

4.2

89

-1.4%

64.56871

-35.7%

1935

93

+39.0%

95

+94.2%

5.9

120

+35.0%

121.7487

+88.6%

1936

117

+26.5%

116

+21.8%

5.6

150

+24.7%

146.1842

+20.1%

1937

73

-38.1%

44

-61.9%

3.5

90

-39.8%

54.1931

-62.9%

1938

89

+22.7%

84

+91.5%

5.4

114

+26.2%

106.7559

+97.0%

100

1939

87

-2.6%

72

-14.6%

4.8

111

-2.6%

91.22098

-14.6%

1940

76

-12.7%

69

-3.8%

5.2

96

-13.3%

87.12327

-4.5%

1941

64

-15.7%

68

-2.0%

6.1

74

-23.3%

77.67114

-10.8%

1942

69

+8.7%

93

+36.3%

7.6

73

-0.3%

97.0832

+25.0%

1943

84

+21.7%

94

+1.7%

6.4

87

+18.2%

95.92084

-1.2%

1944

97

+15.5%

100

+6.3%

5.9

98

+12.9%

99.67736

+3.9%

1945

129

+32.9%

125

+24.5%

5.5

127

+30.0%

121.3657

+21.8%

1946

117

-9.7%

78

-37.4%

3.8

97

-23.6%

64.27848

-47.0%

1947

114

-2.2%

112

+43.3%

5.6

87

-10.2%

84.6293

+31.7%

1948

110

-3.9%

120

+7.1%

6.2

82

-6.7%

88.02723

+4.0%

1949

123

+12.1%

172

+43.1%

8.0

93

+14.5%

128.6618

+46.2%

1950

149

+21.3%

227

+32.3%

8.7

107

+14.5%

160.7312

+24.9%

1951

171

+14.2%

199

-12.3%

6.7

115

+7.7%

132.9688

-17.3%

1952

183

+7.4%

190

-4.6%

5.9

123

+6.6%

125.9675

-5.3%

1953

174

-5.1%

165

-13.4%

5.4

116

-5.8%

108.3046

-14.0%

1954

249

+43.1%

307

+86.4%

7.0

167

+44.2%

203.3685

+87.8%

1955

299

+20.3%

263

-14.4%

5.0

200

+19.8%

173.4251

-14.7%

1956

312

+4.3%

230

-12.5%

4.2

202

+1.2%

147.3988

-15.0%

1957

268

-14.1%

175

-24.0%

3.7

169

-16.5%

108.8595

-26.1%

1958

374

+39.3%

361

+106.4%

5.5

231

+36.9%

220.8343

+102.9%

1959

407

+9.0%

255

-29.3%

3.6

248

+7.2%

153.5392

-30.5%

1960

398

-2.2%

237

-7.2%

3.4

239

-3.6%

140.5374

-8.5%

1961

491

+23.3%

313

+32.3%

3.6

293

+22.5%

184.6736

+31.4%

1962

426

-13.3%

222

-29.2%

3.0

251

-14.4%

129.1071

-30.1%

1963

499

+17.1%

330

+49.0%

3.8

289

+15.2%

189.2013

+46.5%

1964

563

+12.8%

340

+2.9%

3.5

323

+11.8%

192.8581

+1.9%

1965

624

+11.0%

370

+9.0%

3.4

351

+8.9%

206.2102

+6.9%

1966

551

-11.7%

289

-22.1%

3.0

300

-14.6%

155.3255

-24.7%

1967

688

+24.7%

462

+60.1%

3.8

363

+21.0%

241.2677

+55.3%

1968

763

+10.9%

433

-6.2%

3.2

385

+5.9%

216.1173

-10.4%

1969

660

-13.5%

309

-28.8%

2.7

313

-18.6%

144.948

-32.9%

1970

637

-3.4%

388

+25.6%

3.5

287

-8.5%

172.5109

+19.0%

1971

719

+12.8%

426

+9.7%

3.4

313

+9.2%

183.3158

+6.3%

13 February 2014

123

Barclays | Equity Gilt Study

Year

Equity Price Index


December

Equity Income Index


December

Income
Yield %

Equity Price Index


Adjusted for Cost of
Living

Equity Income Index


Adjusted for Cost of
Living

1972

822

+14.3%

443

+4.1%

3.1

346

+10.5%

184.6129

+0.7%

1973

648

-21.2%

275

-37.9%

2.4

251

-27.5%

105.4249

-42.9%

1974

446

-31.1%

244

-11.5%

3.1

154

-38.6%

83.09118

-21.2%

1975

589

+31.8%

570

+134.1%

5.5

190

+23.3%

181.8689

+118.9%

1976

717

+21.9%

609

+6.8%

4.9

221

+16.3%

185.2505

+1.9%

1977

665

-7.3%

503

-17.5%

4.3

192

-13.1%

143.3172

-22.6%

1978

687

+3.3%

631

+25.6%

5.3

182

-5.3%

165.0831

+15.2%

1979

813

+18.3%

870

+37.8%

6.1

190

+4.4%

200.8288

+21.7%

1980

1033

+27.1%

1104

+26.9%

6.1

214

+13.0%

226.5215

+12.8%

1981

947

-8.4%

724

-34.5%

4.4

180

-15.9%

136.2667

-39.8%

1982

1082

+14.2%

1169

+61.5%

6.2

198

+10.0%

211.9111

+55.5%

1983

1275

+17.9%

1062

-9.1%

4.8

225

+13.6%

185.6026

-12.4%

1984

1260

-1.1%

950

-10.5%

4.3

214

-4.9%

159.7439

-13.9%

1985

1594

+26.5%

1380

+45.2%

4.9

261

+21.8%

223.4761

+39.9%

1986

1782

+11.8%

1176

-14.8%

3.8

289

+10.6%

188.3881

-15.7%

1987

1758

-1.4%

980

-16.7%

3.2

273

-5.5%

150.3413

-20.2%

1988

1986

+13.0%

1590

+62.2%

4.6

295

+8.2%

233.4902

+55.3%

1989

2463

+24.0%

1898

+19.4%

4.4

350

+18.5%

266.3835

+14.1%

1990

2232

-9.4%

1291

-32.0%

3.3

299

-14.6%

170.8305

-35.9%

1991

2893

+29.6%

2029

+57.1%

4.0

376

+25.8%

260.4422

+52.5%

1992

3070

+6.1%

1583

-22.0%

2.9

387

+3.1%

197.4466

-24.2%

1993

3340

+8.8%

1630

+3.0%

2.8

410

+5.9%

197.882

+0.2%

1994

3230

-3.3%

1427

-12.4%

2.5

386

-5.8%

168.7556

-14.7%

1995

4280

+32.5%

2369

+66.0%

3.2

499

+29.2%

273.1493

+61.9%

1996

5083

+18.8%

2143

-9.5%

2.4

574

+14.9%

239.1344

-12.5%

1997

6515

+28.2%

2465

+15.1%

2.2

723

+26.0%

270.5191

+13.1%

1998

7852

+20.5%

2414

-2.1%

1.8

858

+18.6%

260.6437

-3.7%

1999

9707

+23.6%

2748

+13.9%

1.6

1032

+20.4%

289.0055

+10.9%

2000

8538

-12.0%

1460

-46.9%

1.0

878

-14.9%

148.5654

-48.6%

2001

7475

-12.4%

1539

+5.4%

1.2

757

-13.8%

154.1517

+3.8%

2002

5822

-22.1%

1291

-16.1%

1.3

576

-23.9%

126.341

-18.0%

2003

7614

+30.8%

3138

+143.1%

2.4

740

+28.4%

301.4171

+138.6%

2004

8440

+10.8%

3177

+1.2%

2.2

794

+7.3%

295.5299

-2.0%

2005

8895

+5.4%

2998

-5.6%

1.9

809

+1.9%

269.6324

-8.8%

2006

10144

+14.0%

3835

+27.9%

2.2

900

+11.2%

336.3792

+24.8%

2007

10679

+5.3%

3772

-1.7%

2.0

910

+1.1%

317.8357

-5.5%

2008

6444

-39.65%

1622

-56.99%

1.4

549

-39.71%

136.5846

-57.03%

2009

8254

+28.08%

4629

+185.36%

3.2

684

+24.69%

379.4274

+177.80%

2010

9524

+15.39%

4135

-10.68%

2.5

778

+13.69%

333.9069

-12.00%

2011

9229

-3.11%

3287

-20.51%

2.0

732

-5.89%

257.7781

-22.80%

2012

10414

+12.85%

5173

+57.39%

2.8

812

+10.92%

398.7823

+54.70%

2013

13022

+25.03%

5268

+1.85%

2.2

1000

+23.18%

400.1373

+0.34%

13 February 2014

124

Barclays | Equity Gilt Study


FIGURE 15
Barclays US Bond Index
Year

Bond Price Index


December

Yield %

Bond Price Index


adjusted for Cost of Living

1925

100

1926

104

+3.9%

3.5

105

+5.1%

1927

110

+5.4%

3.2

113

+7.8%

1928

106

-3.1%

3.4

111

-2.0%

1929

106

-0.2%

3.4

110

-0.8%

1930

107

+1.3%

3.3

119

+8.2%

100

1931

98

-8.5%

4.1

120

+0.9%

1932

111

+12.9%

3.2

151

+25.8%

1933

107

-3.1%

3.4

146

-3.9%

1934

115

+6.8%

2.9

153

+5.2%

1935

117

+2.1%

2.8

152

-0.8%

1936

122

+4.6%

2.6

157

+3.1%

1937

119

-2.5%

2.7

148

-5.2%

1938

123

+2.8%

2.5

157

+5.8%

1939

127

+3.5%

2.3

163

+3.5%

1940

132

+3.8%

1.9

167

+3.0%

1941

131

-1.0%

2.0

151

-10.0%

1942

131

+0.7%

2.4

139

-7.6%

1943

131

-0.4%

2.5

135

-3.3%

1944

131

+0.3%

2.4

132

-1.9%

1945

142

+8.1%

2.0

140

+5.8%

1946

139

-2.4%

2.1

115

-17.4%

1947

132

-4.9%

2.4

101

-12.6%

1948

133

+0.9%

2.4

99

-2.0%

1949

138

+4.0%

2.1

105

+6.2%

1950

135

-2.3%

2.2

97

-7.8%

1951

127

-6.3%

2.7

86

-11.6%

1952

125

-1.4%

2.8

84

-2.1%

1953

126

+0.9%

2.7

84

+0.2%

1954

131

+4.1%

2.6

88

+4.9%

1955

126

-3.6%

3.0

84

-4.0%

1956

115

-9.1%

3.4

75

-11.7%

1957

120

+4.7%

3.2

76

+1.8%

1958

110

-8.4%

3.8

68

-10.0%

1959

103

-6.4%

4.4

63

-8.0%

1960

112

+9.0%

3.8

68

+7.5%

1961

109

-3.4%

4.0

65

-4.0%

1962

113

+4.0%

3.8

67

+2.6%

1963

108

-4.3%

4.1

63

-5.8%

1964

109

+0.4%

4.1

62

-0.6%

1965

104

-3.9%

4.4

59

-5.7%

1966

104

+0.0%

4.5

57

-3.3%

1967

94

-9.9%

5.2

50

-12.6%

1968

89

-14.9%

5.7

45

-21.1%

1969

79

-11.1%

6.6

37

-16.3%

1970

85

+7.0%

6.2

38

+1.4%

1971

95

+12.2%

4.5

41

+8.6%

13 February 2014

125

Barclays | Equity Gilt Study

Year

Bond Price Index


December

Yield %

Bond Price Index


adjusted for Cost of Living

1972

96

+1.3%

4.5

40

-2.1%

1973

88

-8.8%

7.1

34

-16.1%

1974

84

-3.8%

7.7

29

-14.4%

1975

83

-1.7%

7.7

27

-8.0%

1976

91

+9.8%

6.9

28

+4.7%

1977

86

-6.0%

7.5

25

-11.9%

1978

77

-10.3%

8.8

20

-17.7%

1979

69

-10.0%

9.9

16

-20.5%

1980

60

-13.3%

11.6

12

-22.9%

1981

53

-11.5%

13.7

10

-18.7%

1982

65

+23.3%

10.5

12

+18.8%

1983

59

-9.4%

11.6

10

-12.7%

1984

61

+2.5%

11.3

10

-1.4%

1985

72

+18.7%

9.3

12

+14.3%

1986

84

+16.1%

7.6

14

+14.8%

1987

75

-11.0%

8.8

12

-14.8%

1988

74

-0.6%

8.8

11

-4.8%

1989

81

+9.5%

7.9

12

+4.6%

1990

79

-2.8%

8.2

11

-8.4%

1991

86

+9.1%

7.3

11

+5.9%

1992

86

-0.3%

7.3

11

-3.1%

1993

93

+8.8%

6.4

11

+5.9%

1994

80

-14.3%

7.9

10

-16.5%

1995

97

+21.1%

5.9

11

+18.1%

1996

90

-7.0%

6.6

10

-10.0%

1997

97

+7.7%

5.9

11

+5.9%

1998

103

+6.1%

5.3

11

+4.4%

1999

88

-14.5%

6.7

-16.8%

2000

100

+13.3%

5.5

10

+9.6%

2001

98

-2.1%

5.7

10

-3.6%

2002

108

+10.5%

4.8

11

+7.9%

2003

105

-2.9%

5.0

10

-4.7%

2004

107

+2.4%

4.8

10

-0.8%

2005

110

+2.2%

4.6

10

-1.2%

2006

105

-4.1%

4.8

-6.5%

2007

109

+4.1%

4.5

-0.0%

2008

131

+19.8%

3.1

11

+19.7%

2009

107

-17.9%

4.5

-20.1%

2010

113

+4.8%

4.1

+3.3%

2011

137

+21.7%

2.5

11

+18.2%

2012

138

+0.4%

2.7

11

-1.3%

2013

116

-15.4%

3.7

-16.7%

13 February 2014

126

Barclays | Equity Gilt Study


FIGURE 16
Barclays US Treasury Bill Index
Year

Treasury Bill Index


December

Treasury Bill Index


adjusted for Cost of Living

1925

100

1926

103

+3.2%

104

+4.4%

1927

106

+3.1%

110

+5.5%

1928

110

+3.8%

116

+5.0%

100

1929

116

+4.7%

120

+4.1%

1930

118

+2.3%

132

+9.3%

1931

120

+1.0%

147

+11.4%

1932

121

+0.8%

165

+12.3%

1933

121

+0.3%

164

-0.5%

1934

121

+0.2%

162

-1.3%

1935

121

+0.2%

157

-2.7%

1936

122

+0.2%

155

-1.3%

1937

122

+0.3%

152

-2.5%

1938

122

+0.0%

156

+2.9%

1939

122

+0.0%

156

+0.0%

1940

122

-0.1%

155

-0.8%

1941

122

+0.0%

141

-9.0%

1942

122

+0.3%

130

-8.0%

1943

123

+0.3%

126

-2.5%

1944

123

+0.3%

124

-1.9%

1945

124

+0.3%

121

-1.9%

1946

124

+0.4%

103

-15.1%

1947

125

+0.5%

95

-7.7%

1948

126

+1.0%

93

-2.0%

1949

127

+1.1%

96

+3.2%

1950

129

+1.2%

92

-4.5%

1951

131

+1.5%

88

-4.3%

1952

133

+1.6%

89

+0.9%

1953

135

+1.8%

90

+1.0%

1954

136

+0.9%

91

+1.6%

1955

138

+1.6%

92

+1.2%

1956

142

+2.4%

92

-0.5%

1957

146

+3.1%

92

+0.2%

1958

148

+1.4%

92

-0.3%

1959

152

+2.8%

93

+1.1%

1960

156

+2.6%

94

+1.2%

1961

160

+2.2%

95

+1.5%

1962

164

+2.7%

97

+1.4%

1963

169

+3.2%

98

+1.5%

1964

175

+3.5%

101

+2.5%

1965

182

+4.0%

103

+2.0%

1966

191

+4.7%

104

+1.2%

1967

199

+4.1%

105

+1.1%

1968

209

+9.7%

105

+0.5%

1969

223

+6.6%

106

+0.4%

1970

237

+6.4%

107

+0.8%

1971

247

+4.3%

108

+1.0%

1972

257

+3.9%

108

+0.5%

13 February 2014

127

Barclays | Equity Gilt Study

Year

Treasury Bill Index


December

Treasury Bill Index


adjusted for Cost of Living

1973

275

+7.1%

107

-1.5%

1974

297

+8.1%

103

-3.8%

1975

315

+5.8%

102

-1.0%

1976

331

+5.2%

102

+0.3%

1977

348

+5.2%

100

-1.5%

1978

373

+7.3%

99

-1.6%

1979

413

+10.7%

96

-2.3%

1980

461

+11.5%

96

-0.9%

1981

529

+14.9%

101

+5.4%

1982

586

+10.7%

107

+6.6%

1983

638

+8.8%

113

+4.9%

1984

701

+10.0%

119

+5.8%

1985

755

+7.7%

124

+3.7%

1986

801

+6.1%

130

+4.9%

1987

844

+5.4%

131

+0.9%

1988

897

+6.3%

133

+1.8%

1989

971

+8.2%

138

+3.4%

1990

1046

+7.7%

140

+1.5%

1991

1103

+5.5%

143

+2.4%

1992

1141

+3.4%

144

+0.5%

1993

1174

+2.9%

144

+0.1%

1994

1219

+3.9%

146

+1.2%

1995

1287

+5.5%

150

+2.9%

1996

1353

+5.1%

153

+1.8%

1997

1422

+5.1%

158

+3.3%

1998

1490

+4.8%

163

+3.1%

1999

1558

+4.6%

166

+1.8%

2000

1647

+5.8%

169

+2.3%

2001

1710

+3.8%

173

+2.2%

2002

1738

+1.6%

172

-0.7%

2003

1755

+1.0%

170

-0.8%

2004

1776

+1.2%

167

-2.0%

2005

1829

+3.0%

166

-0.4%

2006

1916

+4.8%

170

+2.2%

2007

2006

+4.7%

171

+0.6%

2008

2036

+1.5%

173

+1.4%

2009

2038

+0.1%

169

-2.6%

2010

2040

+0.1%

167

-1.4%

2011

2041

+0.04%

162

-2.8%

2012

2042

+0.06%

159

-1.7%

2013

2043

+0.03%

157

-1.5%

13 February 2014

128

Barclays | Equity Gilt Study

CHAPTER 10

Total investment returns


Sreekala Kochugovindan
+44 (0)20 7773 2234
sreekala.kochugovindan@
barclays.com

Our final chapter presents a series of tables showing the performance of equity and
fixed-interest investments over any period of years since December 1899.
The first section reviews the performance of each asset class, taking inflation into
account, since December 1960. On each page we provide two tables illustrating the
same information in alternative forms. The first table shows the average annual real
rate of return; the second shows the real value of a portfolio at the end of each year,
which includes reinvested income. This section provides data on equities and gilts, with
dividend income reinvested gross. Finally, we provide figures for Treasury bills and
building society shares.
The final pullout section provides the annual real rate of return on UK and US equities
and bonds (with reinvestment of income for each year since 1899 for the UK, and since
1925 for the US). There is also a table showing the real capital value of equities for the
UK. The sources for all data in this chapter are the Barclays indices, as outlined in
Chapter 8.

1960-2013

Equities income gross


Gilts income gross
Treasury Bills income gross
Building Society Shares income gross
Index-linked gilts

UK: 1899-2013
US: 1925-2013

UK and US real bond returns income gross


UK and US real equities returns income gross
UK Equities real capital value

13 February 2014

129

Barclays | Equity Gilt Study

Real return on equities - gross income re-invested


Average Annual Real Rate of Return
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961 (2.5)
1962 (2.4) (2.2)
1963

3.9

7.3

17.7

1964

0.3

1.3

3.0

(9.8)

1965

1.5

2.6

4.2

(1.9)

1966 (0.0)

0.5

1.2

(3.8) (0.7) (7.4)

1967

3.9

5.0

6.6

1968

7.8

9.4

11.5 10.3 16.0 19.3 35.4 39.8

3.9

6.6
9.0

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
annual rate of return is calculated. Reading
the top figure in each column diagonally
down the table gives the real rate of return in
each year since 1960. The table can be used
to see the real rate of return over any period;
thus a purchase made at the end of 1960
would have lost 2.5% (allowing for
reinvestment of income) in one year but
over the first three years (up to the end of
1963) would have given an average annual
real return of 3.9%. Each figure on the
bottom line of the table shows the real
growth up to December 2013 from the year
shown below the figure.

10.2 31.1

1969

4.9

5.9

7.1

5.4

8.8

9.3

15.5

8.5 (15.9)

1970

3.3

3.9

4.7

3.0

5.3

5.0

8.4

1.7 (13.2) (10.5)

1971

5.8

6.6

7.7

6.5

9.0

9.4

13.2

9.1

0.4

9.7

34.4

1972

6.0

6.8

7.7

6.7

8.9

9.2

12.3

8.9

2.3

9.1

20.5

1973

2.1

2.4

2.9

1.5

2.8

2.4

3.9

8.1

(0.1) (6.6) (4.1) (1.9) (16.2) (35.0)

1974 (4.2) (4.4) (4.5) (6.3) (6.0) (7.3) (7.3) (11.8) (18.3) (18.7) (20.7) (33.5) (47.8) (58.1)

INVESTMENT TO END YEAR

1975

1.0

(0.2)

1976 (0.2) (0.0)

0.6

0.8

0.1

(1.1) (0.4) (1.0) (0.3) (3.3) (7.7) (6.4) (5.7) (12.2) (16.6) (9.4) 33.2 (11.1)

0.7

0.1

1.0

(2.3) (7.2) (5.6) (4.6) (12.4) (18.4) (8.6) 99.6

1977

1.5

1.7

2.0

1.0

1.8

1.5

2.3

(0.2) (3.9) (2.3) (1.0) (5.9) (8.5) (0.4) 33.0

8.5

32.5

1978

1.4

1.6

1.9

0.9

1.7

1.4

2.1

(0.2) (3.5) (2.0) (0.9) (5.1) (7.1) (0.3) 23.9

5.7

15.2

1979

1.1

1.3

1.5

0.5

1.3

0.9

1.6

(0.6) (3.6) (2.3) (1.3) (5.1) (6.8) (1.1) 17.5

2.9

8.1

1980

1.8

2.0

2.3

1.4

2.2

1.9

2.6

0.7

(2.0) (0.7)

0.4

(2.8) (4.1)

1.4

17.4

5.6

10.3

3.7

5.5

1981

1.8

2.0

2.2

1.4

2.1

1.9

2.5

0.7

(1.8) (0.5)

0.5

(2.4) (3.5)

1.4

15.0

4.9

8.4

3.1

4.1

8.9

1982

2.6

2.9

3.1

2.4

3.2

3.0

3.6

2.0

(0.2)

1.1

2.1

(0.4) (1.2)

3.5

15.8

7.2

10.6

6.6

8.3

13.1 11.1 21.9

1983

3.4

3.7

4.0

3.3

4.1

3.9

4.6

3.2

1.1

2.5

3.5

1.3

0.7

5.2

16.5

9.0

12.2

9.1

11.0 15.3 14.7 22.1 22.3

1984

4.3

4.6

4.9

4.3

5.1

5.0

5.7

4.4

2.5

3.9

5.0

3.0

2.6

6.9

17.4 10.7 13.8 11.3 13.3 17.4 17.4 23.3 24.0 25.8

1985

4.6

4.9

5.3

4.7

5.5

5.4

6.1

4.9

3.1

4.5

5.5

3.7

3.4

7.5

17.1 11.0 13.8 11.6 13.4 16.7 16.7 20.8 20.5 19.6 13.7

1986

5.3

5.6

5.9

5.4

6.2

6.2

6.9

5.8

4.1

5.4

6.5

4.9

4.7

8.6

17.5 12.0 14.6 12.8 14.5 17.6 17.7 21.2 21.0 20.6 18.1 22.7

1987

5.2

5.6

5.9

5.4

6.1

6.1

6.8

5.7

4.2

5.4

6.4

4.9

4.7

8.3

16.5 11.4 13.7 12.0 13.4 15.9 15.7 18.3 17.6 16.5 13.5 13.4

4.8

1988

5.2

5.5

5.8

5.4

6.1

6.0

6.7

5.7

4.2

5.4

6.3

4.9

4.7

8.0

15.6 10.9 12.9 11.3 12.4 14.6 14.2 16.2 15.3 13.9 11.2 10.3

4.6

1989

5.9

6.2

6.5

6.1

6.8

6.8

7.5

6.5

5.1

6.3

7.3

5.9

5.8

9.1

16.3 11.9 13.9 12.4 13.6 15.6 15.5 17.4 16.7 15.8 13.9 14.0 11.2 14.6 25.8

1990

5.0

5.3

5.5

5.1

5.7

5.7

6.3

5.3

4.0

5.0

5.9

4.6

4.4

7.3

13.8

10.6 12.2 11.7 12.9 11.8 10.4

8.0

6.9

3.3

2.8

2.0 (17.4)

1991

5.3

5.6

5.9

5.5

6.1

6.1

6.7

5.7

4.5

5.5

6.3

5.1

4.9

7.8

13.9 10.0 11.6 10.2 11.0 12.4 12.0 13.2 12.2 11.0

9.1

8.3

5.6

5.9

6.4

1992

5.7

5.9

6.2

5.9

6.5

6.5

7.0

6.2

5.0

6.0

6.8

5.6

5.5

8.2

14.1 10.4 11.9 10.6 11.4 12.8 12.4 13.5 12.7 11.7 10.0

9.5

7.4

8.0

8.9

3.7

16.2 16.8

1993

6.2

6.5

6.8

6.4

7.1

7.1

7.6

6.8

5.7

6.7

7.5

6.4

6.4

9.0

14.6 11.2 12.6 11.5 12.3 13.6 13.4 14.4 13.8 12.9 11.6 11.3

9.8

10.7 11.9

8.7

19.1 20.9 25.1

1994

5.7

6.0

6.3

5.9

6.5

6.5

7.0

6.2

5.1

6.0

6.8

5.7

5.6

8.1

13.3 10.0 11.3 10.2 10.8 12.0 11.6 12.5 11.7 10.8

9.4

8.9

7.3

7.7

8.2

5.0

11.5 10.1

1995

6.1

6.4

6.6

6.3

6.9

6.9

7.4

6.7

5.6

6.5

7.3

6.3

6.2

8.6

13.6 10.5 11.7 10.7 11.3 12.4 12.1 12.9 12.3 11.5 10.2

9.9

8.6

9.1

9.7

7.3

13.0 12.3 10.9

4.4

19.2

1996

6.3

6.6

6.8

6.5

7.1

7.1

7.6

6.9

5.9

6.8

7.5

6.5

6.5

8.8

13.6 10.6 11.8 10.8 11.4 12.5 12.2 12.9 12.3 11.6 10.5 10.2

9.0

9.5

10.1

8.1

13.0 12.5 11.4

7.2

16.1 13.1

1997

6.6

6.9

7.2

6.9

7.4

7.4

8.0

7.3

6.3

7.2

7.9

7.0

6.9

9.2

13.8 11.0 12.1 11.2 11.8 12.8 12.6 13.3 12.8 12.1 11.1 10.9

9.9

10.4 11.1

9.4

13.9 13.6 13.0 10.1 17.1 16.1 19.3

1998

6.7

7.0

7.3

7.0

7.5

7.5

8.0

7.4

6.4

7.3

8.0

7.1

7.1

9.2

13.7 10.9 12.1 11.2 11.8 12.7 12.5 13.2 12.6 12.0 11.1 10.9 10.0 10.5 11.1

9.5

13.5 13.2 12.6 10.2 15.5 14.3 14.9 10.6

1999

7.1

7.4

7.6

7.4

7.9

7.9

8.4

7.8

6.9

7.7

8.4

7.6

7.6

9.7

14.0 11.4 12.5 11.6 12.2 13.1 12.9 13.6 13.2 12.6 11.8 11.6 10.8 11.3 12.0 10.7 14.4 14.2 13.8 12.0 16.7 16.1 17.1 16.0 21.7

2000

6.7

6.9

7.2

6.9

7.4

7.4

7.9

7.3

6.4

7.2

7.8

7.0

7.0

9.0

13.0 10.5 11.5 10.7 11.2 12.0 11.8 12.3 11.8 11.2 10.4 10.2

9.3

9.7

10.1

8.8

11.8 11.4 10.7

8.8

12.0 10.7 10.1

7.2

2001

6.1

6.3

6.6

6.3

6.8

6.8

7.2

6.6

5.7

6.5

7.0

6.2

6.2

8.1

11.9

9.4

10.4

9.5

9.9

10.7 10.4 10.9 10.3

9.7

8.8

8.5

7.6

7.8

8.1

6.7

9.2

8.6

7.7

5.7

7.9

6.2

1.5

2002

5.3

5.5

5.7

5.4

5.8

5.8

6.2

5.5

4.7

5.3

5.9

5.1

5.0

6.7

10.3

8.0

8.8

7.9

8.2

8.8

8.5

8.8

8.2

7.5

6.6

6.2

5.2

5.3

5.3

3.9

5.9

5.1

3.9

1.8

3.2

1.1

2003

5.5

5.7

5.9

5.6

6.1

6.0

6.4

5.8

5.0

5.7

6.2

5.4

5.3

7.0

10.6

8.3

9.1

8.2

8.6

9.2

8.8

9.2

8.6

8.0

7.1

6.8

5.9

6.0

6.1

4.8

6.7

6.0

5.1

3.2

4.6

3.0

1.6

2004

5.6

5.8

6.0

5.7

6.1

6.1

6.5

5.9

5.1

5.8

6.3

5.5

5.4

7.1

10.5

8.3

9.0

8.3

8.6

9.2

8.8

9.2

8.6

8.0

7.2

6.9

6.0

6.1

6.2

5.0

6.9

6.2

5.4

3.7

5.0

3.6

2.5

0.3

2005

5.9

6.1

6.3

6.0

6.4

6.4

6.8

6.2

5.4

6.1

6.6

5.9

5.8

7.5

10.8

8.6

9.4

8.6

8.9

9.5

9.2

9.6

9.1

8.5

7.7

7.4

6.7

6.8

6.9

5.9

7.6

7.1

6.4

4.9

6.2

5.0

4.2

2.4

1.3

2006

6.0

6.2

6.4

6.1

6.5

6.5

6.9

6.4

5.6

6.2

6.8

6.1

6.0

7.6

10.8

8.7

9.4

8.7

9.0

9.6

9.3

9.6

9.2

8.6

7.9

7.6

6.9

7.0

7.2

6.2

7.9

7.4

6.7

5.4

6.7

5.6

4.9

3.4

2.5

0.0

2007

5.9

6.1

6.3

6.0

6.4

6.4

6.8

6.2

5.5

6.1

6.6

5.9

5.8

7.4

10.5

8.5

9.2

8.5

8.7

9.3

9.0

9.3

8.8

8.3

7.6

7.3

6.6

6.7

6.9

5.9

7.4

6.9

6.3

5.1

6.2

5.2

4.5

3.1

2.3

0.2

2008

5.0

5.1

5.3

5.0

5.4

5.4

5.7

5.1

4.4

5.0

5.4

4.7

4.6

6.1

9.0

7.0

7.6

6.9

7.1

7.6

7.3

7.5

7.0

6.4

5.7

5.3

4.6

4.6

4.6

3.6

4.9

4.3

3.5

2.2

3.1

1.9

1.0

9.6

11.3

0.2
(2.4) (4.9)

9.8

17.1
1.3

4.4

(2.2) 15.7

7.0

(8.6)

4.8

5.5

(8.6)

(1.4) (11.2) (13.8)

(0.8) (4.3) (7.8) (15.9) (19.3) (24.5)


(1.1) (3.3) (8.7) (8.7) (6.1) 16.9
(1.4) (5.4) (4.6) (1.4) 12.8
(1.8) (0.3)

8.8

3.4

14.8 13.7 18.9

1.5

4.9

13.9 13.0 15.1 11.4

1.5

4.3

11.2

9.9

10.2

2.9

0.3

(1.8) (7.8) (16.2) (30.4)

(0.5) (1.5) (3.8) (3.2) (1.6)

6.1

2009

5.3

5.5

5.7

5.4

5.8

5.8

6.1

5.6

4.9

5.4

5.9

5.2

5.1

6.6

9.4

7.5

8.1

7.5

7.7

8.1

7.9

8.1

7.6

7.1

6.4

6.1

5.4

5.5

5.5

4.6

5.9

5.4

4.7

3.6

4.4

3.5

2.8

1.5

0.7

(1.2) (0.3)

1.5

5.9

4.1

3.3

2010

5.4

5.6

5.8

5.5

5.9

5.9

6.2

5.7

5.0

5.5

6.0

5.3

5.2

6.6

9.4

7.6

8.2

7.5

7.7

8.2

7.9

8.1

7.7

7.2

6.5

6.2

5.6

5.6

5.7

4.8

6.0

5.6

5.0

3.9

4.7

3.8

3.2

2.0

1.4

(0.3)

2.3

6.3

4.8

4.2

2011

5.1

5.3

5.5

5.2

5.6

5.5

5.8

5.3

4.6

5.2

5.6

5.0

4.9

6.2

8.9

7.1

7.7

7.0

7.2

7.6

7.3

7.5

7.1

6.6

5.9

5.6

5.0

5.0

5.0

4.2

5.3

4.8

4.3

3.2

3.9

3.1

2.4

1.3

0.6

(1.0) (0.2)

1.2

4.6

3.1

2.4

2012

5.2

5.4

5.5

5.3

5.6

5.6

5.9

5.4

4.7

5.3

5.7

5.1

5.0

6.3

8.9

7.1

7.7

7.1

7.3

7.7

7.4

7.6

7.1

6.7

6.0

5.8

5.1

5.2

5.2

4.4

5.5

5.0

4.5

3.5

4.2

3.4

2.8

1.8

1.2

(0.2)

0.5

1.9

5.0

3.8

3.1

1.1

2013

5.4

5.6

5.7

5.5

5.9

5.8

6.1

5.7

5.0

5.5

5.9

5.3

5.3

6.5

9.1

7.4

8.0

7.3

7.6

7.9

7.7

7.9

7.5

7.0

6.4

6.1

5.6

5.6

5.7

4.9

6.0

5.6

5.1

4.1

4.9

4.1

3.6

2.7

2.2

0.9

1.7

3.1

6.1

5.0

4.6

3.0

13 February 2014

0.6

1.0

(0.3) (4.0) (6.4) 25.9


1.5

(0.9) (1.5) 17.1

(0.2) (2.3) (3.2)


(0.6) (0.9)
1.8

2.0

8.9

8.1

0.2

(7.8)

8.3

3.0

0.1

8.7

10.0

6.4

5.6

13.0 17.4

130

Barclays | Equity Gilt Study


Real Value of 100 Invested
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

INVESTMENT TO END YEAR

1961

97

1962

95

98

1963

112

115

118

1964

101

104

106

90

1965

108

111

113

96

1966

100

102

105

89

99

93

1967

131

134

137

117

129

121

131

1968

183

188

192

163

181

170

183

140

1969

154

158

162

137

152

143

154

118

1970

138

141

145

123

136

128

138

105

75

89

1971

185

190

194

165

183

172

185

141

101

120

134

1972

200

205

210

179

198

186

201

153

109

130

145

108

1973

130

134

137

116

129

121

130

99

71

85

94

70

65

1974

55

56

57

49

54

51

55

42

30

35

40

29

27

42

1975

109

112

114

97

108

101

109

83

59

71

79

59

54

84

200

1976

97

99

102

86

96

90

97

74

53

63

70

52

48

74

177

89

1977

128

132

135

114

127

119

128

98

70

83

93

69

64

98

235

118

133

1978

128

132

135

115

127

119

129

98

70

83

93

69

64

99

236

118

133

1979

122

125

128

109

121

113

122

93

67

79

89

66

61

94

224

112

126

95

95

1980

143

147

150

128

141

133

143

109

78

93

104

77

71

110

262

132

148

112

111

117

1981

145

149

152

129

143

134

145

111

79

94

105

78

72

111

266

133

150

113

113

119

101

1982

177

181

186

158

175

164

177

135

97

115

128

95

88

136

324

162

183

138

138

145

124

122

1983

216

222

227

193

214

200

217

165

118

140

157

117

108

166

396

199

223

169

168

177

151

149

122

1984

272

279

286

243

269

252

272

208

149

177

197

147

136

209

499

250

281

212

212

223

190

188

154

126

1985

309

317

325

276

306

287

310

236

169

201

224

167

154

238

567

284

320

241

241

253

216

213

175

143

114

1986

380

390

398

339

375

352

380

290

207

246

275

205

190

292

696

349

392

296

295

311

265

262

215

176

140

123

1987

398

408

417

355

393

369

398

304

217

258

289

215

199

305

729

365

411

310

310

325

278

274

225

184

146

129

105

1988

415

426

436

370

411

385

416

317

227

270

301

224

207

319

762

382

429

324

323

340

290

286

235

192

153

134

109

1989

523

536

549

466

517

485

523

399

286

339

379

282

261

401

958

480

540

408

407

428

365

360

296

242

192

169

138

131

126

1990

432

443

453

385

427

400

433

330

236

280

313

233

216

332

792

397

446

337

336

353

302

298

244

200

159

140

114

109

104

1991

500

513

524

446

494

463

500

382

273

324

363

270

250

384

916

459

516

390

389

409

349

344

283

231

184

162

132

126

120

96

116

1992

584

599

613

521

577

541

584

446

319

379

423

315

291

448 1070 536

603

455

454

478

408

402

330

270

215

189

154

147

141

112

135

117

1993

730

749

766

651

722

677

731

558

399

474

530

394

365

561 1339 671

755

569

568

597

510

503

413

338

268

236

192

184

176

140

169

146

125

1994

668

685

701

596

660

619

669

510

365

434

485

361

333

513 1224 613

690

521

520

546

467

460

378

309

245

216

176

168

161

128

155

134

114

91

1995

796

817

835

710

787

738

797

608

435

517

577

430

397

611 1459 731

822

621

619

651

556

549

450

368

292

257

210

200

192

152

184

159

136

109

119

1996

900

923

944

803

889

834

901

687

492

584

653

486

449

691 1650 827

930

702

700

736

629

620

509

416

331

291

237

226

217

172

208

180

154

123

135

113

1997 1073 1101 1126 957 1061 995 1075 820

586

697

779

579

536

824 1968 986 1109 837

835

878

750

740

607

496

394

347

283

270

258

205

248

215

184

147

161

135

119

1998 1187 1218 1246 1059 1174 1101 1189 907

649

771

862

641

593

912 2177 1091 1227 926

924

972

830

819

672

549

436

384

313

299

286

227

275

238

203

163

178

149

107

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
change in real value is calculated. Reading
the top figure in each column diagonally
down the table gives the growth in each year
since 1960. The table can be used to see the
real growth over any period; thus an
investment of 100 made at the end of 1960
would have fallen to 97 (allowing for
reinvestment of income and the effect of
inflation) in one year but after three years
(up to the end of 1963) would have reached
112 in real terms. Each figure on the
bottom line of the table shows the real
growth up to December 2013 from the year
shown below the figure.

84

100

104
83

132

111

1999 1445 1482 1516 1289 1428 1340 1447 1104 789

938 1048 780

722 1110 2649 1327 1493 1127 1124 1182 1009 996

817

668

531

467

381

363

348

276

334

289

248

198

216

182

161

135

122

2000 1321 1355 1386 1178 1305 1224 1323 1009 722

858

958

713

660 1014 2422 1213 1365 1030 1028 1081 923

910

747

611

485

427

348

332

318

253

306

264

226

181

198

166

147

123

111

2001 1138 1168 1195 1016 1125 1056 1140 870

622

739

826

615

569

874 2088 1046 1177 888

886

932

795

785

644

527

418

368

300

286

274

218

264

228

195

156

171

143

127

106

96

2002

91
79

86

766

849

797

656

470

558

624

464

429

660 1576 790

670

669

703

600

592

486

397

316

278

226

216

207

164

199

172

147

118

129

108

95

80

72

59

65

75

2003 1005 1031 1054 896

993

931 1006 767

549

652

729

542

502

771 1842 923 1038 783

782

822

702

693

568

465

369

325

265

253

242

192

233

201

172

138

150

126

112

94

85

70

76

88

117

2004 1092 1121 1147 974 1080 1013 1094 835

597

709

793

590

546

839 2003 1004 1129 852

850

894

763

753

618

505

402

353

288

275

263

209

253

219

187

150

164

137

121

102

92

76

83

96

127

109

2005 1299 1333 1364 1159 1284 1205 1301 993

710

844

943

702

649

998 2383 1194 1343 1013 1011 1063 908

896

735

601

478

420

342

327

313

249

301

260

223

178

195

163

144

121

109

90

98

114

151

859

882

902

861

888

129

119

2006 1448 1486 1520 1292 1432 1343 1450 1106 791

940 1051 782

723 1112 2656 1331 1497 1129 1127 1185 1012 998

819

670

532

468

382

364

349

277

335

290

248

198

217

182

161

135

122

100

110

127

169

144

133

111

2007 1463 1501 1536 1305 1446 1356 1465 1118 799

950 1062 790

731 1124 2683 1344 1512 1141 1139 1197 1022 1009 827

677

538

473

385

368

352

280

339

293

251

200

219

184

163

136

123

101

111

129

170

146

134

113

101

2008 1018 1045 1068 908 1006 944 1019 778

556

661

739

550

508

782 1867 935 1052 794

711

702

576

471

374

329

268

256

245

195

236

204

174

139

152

128

113

95

86

70

77

89

118

101

93

78

70

2009 1282 1316 1346 1144 1267 1189 1284 979

700

832

930

692

640

985 2351 1178 1325 1000 998 1049 896

884

725

593

471

414

338

322

309

245

297

257

220

176

192

161

142

119

108

89

97

113

149

128

117

99

89

792

833

70
88

126

2010 1397 1433 1466 1246 1381 1295 1399 1067 763

907 1014 754

698 1073 2561 1283 1444 1089 1087 1143 976

963

790

646

513

452

368

351

336

267

323

280

239

191

209

176

155

130

118

97

106

123

163

139

128

107

96

95

137

109

2011 1287 1321 1351 1148 1272 1193 1289 983

836

643

989 2360 1183 1330 1004 1002 1053 899

887

728

595

473

416

339

324

310

246

298

258

221

176

193

162

143

120

108

89

97

113

150

128

118

99

89

88

126

100

92

699 1075 2567 1286 1447 1091 1089 1145 978

965

792

647

514

453

369

352

337

268

324

280

240

192

210

176

156

130

118

97

106

123

163

139

128

108

97

96

138

109

100

109

821 1262 3013 1510 1698 1281 1279 1344 1148 1133 929

760

604

531

433

413

396

314

380

329

282

225

246

206

183

153

138

114

124

144

191

164

150

126

113

112

161

128

118

128

703

2012 1400 1436 1469 1249 1384 1298 1402 1069 765

934

695

909 1016 756

2013 1643 1686 1724 1465 1624 1523 1645 1255 898 1067 1192 887

13 February 2014

117

131

Barclays | Equity Gilt Study

Real return on gilts - gross income re-invested


Average Annual Real Rate of Return
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961 (11.9)
1962

3.5

21.5

1963

2.9

11.2

1964

0.4

4.9 (2.6) (6.7)

1965

0.3

3.6 (1.8) (3.5) (0.1)

1966

0.3

3.0 (1.2) (2.2) 0.2

0.5

1967

0.3

2.5 (0.9) (1.6) 0.2

0.3

1.8

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
annual rate of return is calculated. Reading
the top figure in each column diagonally
down the table gives the real rate of return in
each year since 1960. The table can be used
to see the real rate of return over any period;
thus a purchase made at the end of 1960
would have lost 11.9% (allowing for
reinvestment of income) in one year but over
the first three years (up to the end of 1963)
would have given an average annual real
return of 2.9%. Each figure on the bottom line
of the table shows the real growth up to
December 2013 from the year shown below
the figure.

0.1

1968 (0.8) 0.9 (2.1) (2.9) (1.9) (2.5) (4.0) (7.8)


1969 (1.1) 0.3 (2.4) (3.1) (2.4) (2.9) (4.0) (6.1) (4.2)
1970 (1.4) (0.2) (2.6) (3.2) (2.6) (3.1) (4.0) (5.4) (4.1) (4.0)
1971

0.1

1.4 (0.6) (0.9) (0.1) (0.1) (0.2) (0.3) 2.4

5.9

1972 (0.9) 0.2 (1.7) (2.1) (1.5) (1.7) (2.0) (2.4) (1.0) 0.0

16.8
2.1 (10.7)

1973 (2.3) (1.4) (3.3) (3.7) (3.4) (3.8) (4.4) (5.1) (4.6) (4.7) (4.9) (14.2)(17.6)
1974 (4.4) (3.8) (5.7) (6.4) (6.3) (7.0) (7.9) (9.0) (9.1) (10.1)(11.6)(19.4)(23.4)(28.8)
1975 (3.6) (2.9) (4.6) (5.1) (5.0) (5.4) (6.1) (6.8) (6.7) (7.1) (7.7) (13.0)(13.7)(11.7) 9.5
1976 (3.4) (2.8) (4.4) (4.8) (4.7) (5.1) (5.6) (6.2) (6.0) (6.3) (6.6) (10.7)(10.7) (8.3) 4.1 (1.1)
1977 (1.8) (1.1) (2.4) (2.7) (2.4) (2.6) (2.9) (3.2) (2.6) (2.4) (2.2) (5.1) (3.9) (0.1) 11.8 13.0 29.1
1978 (2.2) (1.6) (2.9) (3.2) (2.9) (3.1) (3.4) (3.8) (3.3) (3.2) (3.1) (5.7) (4.8) (2.1) 6.1

5.0

8.1 (9.4)

1979 (2.7) (2.2) (3.4) (3.7) (3.5) (3.7) (4.1) (4.4) (4.1) (4.1) (4.1) (6.4) (5.8) (3.6) 2.4

0.7

1.3 (10.3)(11.2)

1980 (2.3) (1.8) (2.9) (3.2) (3.0) (3.2) (3.4) (3.7) (3.4) (3.3) (3.2) (5.2) (4.5) (2.5) 2.8

1.5

2.2 (5.5) (3.4) 5.0

INVESTMENT TO END YEAR

1981 (2.7) (2.2) (3.3) (3.6) (3.4) (3.6) (3.8) (4.1) (3.8) (3.8) (3.8) (5.6) (5.0) (3.3) 1.0 (0.4) (0.2) (6.4) (5.4) (2.3) (9.2)
1982 (0.9) (0.4) (1.4) (1.5) (1.2) (1.3) (1.4) (1.5) (1.0) (0.8) (0.5) (1.9) (1.0) 1.0

5.5

5.0

6.0

1.9

5.0

11.1 14.2 43.6

1983 (0.5) 0.1 (0.8) (1.0) (0.7) (0.7) (0.8) (0.8) (0.3) (0.0) 0.3 (1.0) (0.1) 1.9

6.0

5.6

6.6

3.2

6.0

10.8 12.8 25.7 10.0

1984 (0.4) 0.2 (0.7) (0.8) (0.5) (0.5) (0.6) (0.6) (0.2) 0.1

0.4 (0.8) 0.1

1.9

5.6

5.2

6.0

3.1

5.3

9.0

10.0 17.3

6.0

2.1

1985 (0.2) 0.4 (0.5) (0.6) (0.3) (0.3) (0.3) (0.3) 0.1

0.4

0.7 (0.4) 0.5

2.2

5.6

5.2

5.9

3.3

5.3

8.3

9.0

14.1

5.7

3.6

5.0

1986

0.1

0.6 (0.2) (0.3) 0.1

0.1

0.0

0.0

0.5

0.8

1.1

0.1

0.9

2.5

5.7

5.3

6.0

3.7

5.5

8.1

8.7

12.6

6.0

4.7

6.0

7.0

1987

0.5

1.0

0.3

0.2

0.6

0.6

0.6

0.6

1.1

1.4

1.7

0.8

1.6

3.2

6.2

5.9

6.6

4.5

6.2

8.6

9.1

12.5

7.2

6.5

8.0

9.5

1988

0.6

1.1

0.4

0.3

0.6

0.7

0.7

0.7

1.1

1.4

1.7

0.9

1.7

3.1

5.9

5.6

6.2

4.3

5.8

7.9

8.3

11.0

6.4

5.7

6.6

7.1

7.2

2.4

1989

0.5

1.0

0.3

0.2

0.5

0.6

0.6

0.6

1.0

1.3

1.6

0.8

1.5

2.8

5.4

5.1

5.6

3.8

5.1

6.9

7.1

9.4

5.2

4.4

4.9

4.8

4.2

0.4 (1.7)

1990

0.4

0.8

0.2

0.1

0.4

0.4

0.4

0.4

0.8

1.0

1.3

0.6

1.2

2.5

4.8

4.5

4.9

3.3

4.4

5.9

6.0

7.9

4.1

3.3

3.4

3.1

2.2 (0.9) (2.5) (3.4)

1991

0.8

1.2

0.6

0.6

0.8

0.9

0.9

0.9

1.3

1.6

1.9

1.2

1.8

3.1

5.3

5.1

5.5

4.0

5.1

6.6

6.7

8.4

5.1

4.5

4.9

4.8

4.4

2.6

2.6

4.8

13.8

1992

1.2

1.7

1.1

1.0

1.3

1.4

1.4

1.5

1.9

2.2

2.5

1.8

2.5

3.7

5.9

5.6

6.1

4.7

5.8

7.2

7.4

9.1

6.1

5.7

6.1

6.3

6.2

5.0

5.7

8.3

14.6 15.4

1993

1.9

2.4

1.8

1.8

2.1

2.2

2.3

2.3

2.8

3.1

3.4

2.8

3.5

4.7

6.8

6.7

7.2

5.9

7.1

8.5

8.8

10.4

7.8

7.6

8.2

8.6

8.9

8.3

9.5

12.5 18.4 20.8 26.4

1994

1.4

1.8

1.3

1.3

1.5

1.6

1.6

1.7

2.1

2.3

2.6

2.0

2.7

3.7

5.7

5.5

5.9

4.7

5.6

6.8

7.0

8.3

5.8

5.4

5.8

5.9

5.7

4.8

5.2

6.7

9.4

7.9

4.4 (13.8)

1995

1.8

2.2

1.7

1.7

2.0

2.0

2.1

2.1

2.5

2.8

3.1

2.6

3.2

4.2

6.1

6.0

6.4

5.2

6.2

7.4

7.5

8.8

6.5

6.2

6.6

6.8

6.7

6.1

6.6

8.1

10.5

9.7

7.9 (0.3) 15.3

1996

1.9

2.3

1.8

1.8

2.1

2.1

2.2

2.2

2.6

2.9

3.2

2.7

3.3

4.3

6.1

5.9

6.3

5.2

6.1

7.2

7.4

8.6

6.4

6.1

6.5

6.6

6.6

6.0

6.4

7.6

9.6

8.8

7.2

1.5

10.1

1997

2.2

2.6

2.1

2.1

2.4

2.5

2.6

2.7

3.0

3.3

3.6

3.1

3.7

4.7

6.5

6.3

6.7

5.7

6.6

7.7

7.8

9.0

7.0

6.8

7.1

7.3

7.3

6.9

7.4

8.6

10.4

9.8

8.8

4.7

11.8 10.1 15.3

1998

2.7

3.1

2.6

2.7

2.9

3.0

3.1

3.2

3.6

3.9

4.2

3.7

4.3

5.3

7.1

7.0

7.4

6.4

7.3

8.3

8.5

9.7

7.8

7.7

8.1

8.4

8.5

8.1

8.7

10.0 11.7 11.5 10.8

7.9

14.2 13.8 18.4 21.7

1999

2.5

2.9

2.4

2.4

2.7

2.8

2.9

2.9

3.3

3.6

3.8

3.4

4.0

4.9

6.6

6.4

6.8

5.9

6.6

7.6

7.8

8.8

7.0

6.8

7.2

7.3

7.4

7.0

7.4

8.3

9.7

9.2

8.4

5.6

10.0

8.7

9.9

7.4 (5.2)

2000

2.6

3.0

2.5

2.5

2.8

2.9

3.0

3.0

3.4

3.7

3.9

3.5

4.1

5.0

6.5

6.4

6.7

5.9

6.6

7.6

7.7

8.6

7.0

6.8

7.1

7.2

7.3

6.9

7.3

8.1

9.4

8.9

8.1

5.7

9.3

8.2

9.0

7.0

0.3

6.1

2001

2.5

2.9

2.5

2.5

2.7

2.8

2.9

3.0

3.3

3.6

3.8

3.4

3.9

4.8

6.3

6.2

6.5

5.6

6.4

7.2

7.3

8.2

6.6

6.5

6.7

6.8

6.8

6.4

6.8

7.5

8.5

8.0

7.2

5.0

8.1

6.9

7.3

5.3

0.4

3.3

0.6

2002

2.6

3.0

2.6

2.6

2.8

2.9

3.0

3.1

3.4

3.7

3.9

3.5

4.0

4.9

6.3

6.2

6.5

5.7

6.4

7.2

7.3

8.2

6.6

6.5

6.7

6.8

6.8

6.5

6.7

7.4

8.4

7.9

7.2

5.2

7.9

6.9

7.2

5.6

1.9

4.4

3.6

6.7

2003

2.5

2.9

2.5

2.5

2.7

2.8

2.9

3.0

3.3

3.5

3.7

3.4

3.8

4.7

6.1

5.9

6.2

5.4

6.1

6.8

6.9

7.7

6.3

6.1

6.3

6.3

6.3

6.0

6.2

6.8

7.6

7.1

6.4

4.6

6.8

5.8

5.9

4.4

1.3

3.0

2.0

2.7 (1.2)

2004

2.5

2.9

2.5

2.5

2.8

2.8

2.9

3.0

3.3

3.5

3.7

3.4

3.8

4.6

6.0

5.9

6.1

5.3

6.0

6.7

6.8

7.5

6.1

5.9

6.1

6.2

6.2

5.8

6.0

6.6

7.3

6.8

6.1

4.5

6.5

5.6

5.6

4.3

1.7

3.1

2.4

3.0

1.2

3.6

2005

2.6

3.0

2.6

2.6

2.8

2.9

3.0

3.0

3.4

3.6

3.8

3.4

3.9

4.7

6.0

5.9

6.1

5.4

6.0

6.7

6.7

7.5

6.1

6.0

6.1

6.2

6.2

5.8

6.0

6.5

7.2

6.8

6.1

4.6

6.5

5.6

5.7

4.5

2.3

3.6

3.1

3.7

2.8

4.8

6.0

2006

2.5

2.8

2.4

2.4

2.7

2.7

2.8

2.9

3.1

3.4

3.6

3.2

3.7

4.4

5.6

5.5

5.7

5.0

5.6

6.3

6.3

7.0

5.7

5.5

5.6

5.7

5.6

5.3

5.4

5.9

6.5

6.0

5.4

3.9

5.5

4.7

4.6

3.5

1.4

2.4

1.8

2.1

0.9

1.7

0.7 (4.4)

2007

2.4

2.8

2.4

2.4

2.6

2.7

2.7

2.8

3.1

3.3

3.5

3.2

3.6

4.3

5.5

5.4

5.6

4.9

5.4

6.1

6.1

6.7

5.5

5.3

5.4

5.5

5.4

5.1

5.2

5.6

6.1

5.7

5.1

3.7

5.2

4.4

4.3

3.3

1.4

2.3

1.7

1.9

1.0

1.5

0.9 (1.7) 1.2

2008

2.6

3.0

2.6

2.6

2.8

2.9

2.9

3.0

3.3

3.5

3.7

3.4

3.8

4.5

5.7

5.6

5.8

5.1

5.6

6.3

6.3

6.9

5.7

5.5

5.7

5.7

5.7

5.4

5.5

5.9

6.5

6.0

5.5

4.2

5.6

4.9

4.9

4.0

2.4

3.3

2.9

3.3

2.7

3.5

3.5

2.6

6.4

11.8

2009

2.5

2.8

2.5

2.5

2.7

2.7

2.8

2.9

3.1

3.3

3.5

3.2

3.6

4.3

5.4

5.3

5.5

4.8

5.3

5.9

6.0

6.5

5.4

5.2

5.3

5.3

5.3

5.0

5.1

5.4

5.9

5.5

4.9

3.7

5.0

4.3

4.3

3.4

1.9

2.6

2.2

2.4

1.8

2.3

2.1

1.1

3.0

4.0 (3.3)

2010

2.5

2.9

2.5

2.5

2.7

2.8

2.8

2.9

3.2

3.4

3.6

3.2

3.6

4.3

5.4

5.3

5.5

4.8

5.3

5.9

5.9

6.5

5.3

5.2

5.3

5.3

5.2

4.9

5.1

5.4

5.8

5.4

4.9

3.8

5.0

4.3

4.3

3.5

2.1

2.8

2.4

2.6

2.2

2.6

2.5

1.8

3.4

4.1

0.5

4.4

2011

2.8

3.1

2.8

2.8

3.0

3.1

3.1

3.2

3.4

3.6

3.8

3.5

3.9

4.6

5.7

5.5

5.7

5.1

5.6

6.2

6.2

6.8

5.7

5.5

5.7

5.7

5.6

5.4

5.5

5.8

6.3

5.9

5.5

4.4

5.6

5.0

5.0

4.3

3.1

3.8

3.6

3.9

3.6

4.2

4.3

4.0

5.8

6.9

5.4

10.0 15.8

2012

2.8

3.1

2.7

2.7

3.0

3.0

3.1

3.1

3.4

3.6

3.8

3.5

3.9

4.5

5.5

5.4

5.6

5.0

5.5

6.0

6.1

6.6

5.5

5.4

5.5

5.5

5.5

5.2

5.3

5.6

6.1

5.7

5.3

4.3

5.4

4.8

4.8

4.1

3.0

3.6

3.4

3.7

3.4

3.9

4.0

3.7

5.1

5.9

4.4

7.1

8.5

2013

2.5

2.8

2.5

2.5

2.7

2.7

2.8

2.8

3.1

3.3

3.4

3.1

3.5

4.1

5.1

5.0

5.2

4.6

5.0

5.5

5.6

6.0

5.0

4.9

4.9

4.9

4.9

4.6

4.7

5.0

5.3

5.0

4.5

3.5

4.5

3.9

3.9

3.2

2.1

2.6

2.4

2.5

2.1

2.5

2.4

1.9

2.8

3.1

1.5

2.7

2.1 (4.2) (9.6)

13 February 2014

12.1

5.1

1.6

132

Barclays | Equity Gilt Study


Real Value of 100 Invested
INVESTMENT FROM END YEAR

INVESTMENT TO END YEAR

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961

88

1962

107

121

1963

109

124

102

1964

102

115

95

93

1965

101

115

95

93

100

1966

102

116

95

94

100

101

1967

102

116

95

94

100

101

100

1968

94

107

88

86

93

93

92

92

1969

90

102

84

83

89

89

88

88

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
change in real value is calculated. Reading the
top figure in each column diagonally down
the table gives the growth in each year since
1960. The table can be used to see the real
growth over any period; thus an investment
of 100 made at the end of 1960 would have
fallen to 88 (allowing for reinvestment of
income and the effect of inflation) in one year
but after three years (up to the end of 1963)
would have reached 109 in real terms. Each
figure on the bottom line of the table shows
the real growth up to December 2013 from
the year shown below the figure.

96

1970

87

98

81

79

85

85

85

85

92

96

1971

101

115

94

93

99

100

99

99

107

112

117

1972

90

102

84

83

89

89

88

88

96

100

104

89

1973

74

84

69

68

73

73

73

73

79

83

86

74

82

1974

53

60

49

49

52

52

52

52

56

59

61

52

59

71

1975

58

66

54

53

57

57

57

57

62

64

67

57

64

78

110

1976

57

65

54

53

56

56

56

56

61

64

66

57

63

77

108

99

1977

74

84

69

68

73

73

73

72

79

82

86

73

82

100

140

128

129

1978

67

76

63

61

66

66

66

66

71

74

77

66

74

90

127

116

117

91

1979

59

68

56

55

59

59

58

58

63

66

69

59

66

80

112

103

104

80

89

1980

62

71

58

57

61

62

61

61

66

69

72

62

69

84

118

108

109

84

93

1981

57

64

53

52

56

56

56

56

60

63

66

56

63

76

107

98

99

77

85

95

91

1982

81

92

76

75

80

80

80

80

87

90

94

81

90

110

154

141

142

110

122

137

130

144

1983

90

102

84

82

88

88

88

88

95

99

104

89

99

121

169

155

156

121

134

151

143

158

110

1984

92

104

86

84

90

90

90

90

97

102

106

91

101

123

173

158

160

124

137

154

147

161

112

102

1985

96

109

90

88

95

95

94

94

102

107

111

95

107

129

182

166

168

130

143

162

154

169

118

107

105

1986

103

117

96

94

101

101

101

101

109

114

119

102

114

138

194

177

179

139

153

173

165

181

126

115

112

107

1987

115

131

108

106

113

114

113

113

123

128

133

114

128

155

218

199

201

156

172

194

185

203

142

129

126

120

112

1988

118

134

110

108

116

116

116

116

126

131

137

117

131

159

223

204

206

160

176

199

189

208

145

132

129

123

115

102

1989

116

132

109

107

114

114

114

114

123

129

134

115

129

156

220

200

203

157

173

195

186

205

143

130

127

121

113

101

98

1990

112

127

105

103

110

111

110

110

119

125

130

111

124

151

212

194

196

152

167

189

180

198

138

125

123

117

109

97

95

97

1991

128

145

119

117

126

126

125

125

136

142

148

126

142

172

241

220

223

173

191

215

204

225

157

142

139

133

124

111

108

110

114

1992

147

167

138

135

145

145

144

144

157

164

170

146

163

198

279

254

257

199

220

248

236

260

181

164

161

153

143

128

125

127

131

115

1993

186

211

174

171

183

184

183

182

198

207

215

184

206

251

352

321

325

252

278

313

298

328

229

208

203

194

181

162

158

160

166

146

126

1994

161

182

150

147

158

158

157

157

171

178

186

159

178

216

303

277

280

217

240

270

257

283

197

179

175

167

156

139

136

138

143

126

109

1995

185

210

173

170

182

182

181

181

197

205

214

183

205

249

350

319

323

250

276

311

296

326

227

206

202

193

180

160

157

159

165

145

126

99

115

1996

195

221

182

179

191

192

191

191

207

216

225

193

216

262

368

336

340

263

290

327

311

343

239

217

213

202

189

169

165

167

173

152

132

104

121

105

1997

224

255

210

206

221

221

220

220

238

249

259

222

248

302

424

387

391

303

335

377

359

395

275

250

245

233

218

194

190

193

200

176

152

120

140

121

115

1998

273

310

255

250

268

269

267

267

290

303

315

270

302

367

516

471

476

369

407

459

437

481

335

304

298

284

265

237

231

235

243

214

185

146

170

147

140

122

1999

259

294

242

237

254

255

254

253

275

287

299

256

287

348

489

446

451

350

386

435

414

456

317

288

282

269

251

224

219

223

230

202

175

139

161

140

133

115

95

2000

274

311

256

252

270

270

269

269

292

305

317

272

304

369

519

473

479

371

410

461

439

483

337

306

300

285

267

238

232

236

245

215

186

147

171

148

141

122

101

106

2001

276

314

258

253

272

272

271

270

293

306

319

273

306

371

522

476

482

373

412

464

442

487

339

308

302

287

269

239

234

238

246

216

187

148

172

149

142

123

101

107

101

2002

295

334

275

270

290

290

289

289

313

327

341

292

326

396

557

508

514

398

440

495

471

519

362

329

322

306

287

255

249

254

263

231

200

158

183

159

151

131

108

114

107

107

2003

291

330

272

267

286

287

285

285

309

323

336

288

322

391

550

502

508

393

434

489

466

513

357

325

318

303

283

252

246

251

259

228

197

156

181

157

150

130

107

113

106

105

99

2004

301

342

282

277

297

297

296

295

320

335

349

298

334

405

570

520

526

407

450

507

482

531

370

336

329

314

293

261

255

260

269

236

205

162

188

163

155

134

111

117

110

109

102

104

2005

320

363

299

293

315

315

313

313

340

355

370

316

354

430

604

552

558

432

477

537

512

563

392

357

349

333

311

277

271

275

285

250

217

172

199

173

164

143

117

124

117

116

109

110

106

2006

306

347

286

281

301

301

300

299

325

339

353

303

339

411

578

527

534

413

456

514

489

539

375

341

334

318

297

265

259

263

272

239

207

164

190

165

157

136

112

118

111

111

104

105

101

2007

309

351

289

284

304

305

303

303

329

343

357

306

343

416

584

534

540

418

462

520

495

545

380

345

338

322

301

268

262

266

276

242

210

166

193

167

159

138

113

120

113

112

105

106

103

97

101

2008

346

393

323

317

340

341

339

339

367

384

400

342

383

465

653

597

604

467

516

581

553

609

424

386

378

360

336

300

293

298

308

271

235

186

215

187

178

154

127

134

126

125

117

119

115

108

113

2009

335

380

313

307

329

330

328

328

355

371

387

331

371

450

632

577

584

452

499

562

535

589

411

373

365

348

325

290

283

288

298

262

227

180

208

181

172

149

123

129

122

121

114

115

111

105

109

108

97

2010

349

397

326

321

344

344

342

342

371

388

404

346

387

470

660

603

610

472

521

587

559

615

429

390

382

363

340

303

296

301

311

274

237

187

218

189

180

156

128

135

127

126

119

120

116

109

114

113

101

104

2011

405

459

378

371

398

399

397

396

430

449

468

400

448

544

764

698

706

547

604

680

647

713

496

451

442

421

393

351

342

348

360

317

274

217

252

219

208

180

148

156

147

146

137

139

134

127

132

131

117

121

116

2012

411

467

384

377

405

405

403

403

437

456

475

407

456

553

777

709

718

556

614

691

658

724

505

459

449

428

400

357

348

354

366

322

279

221

256

222

211

183

151

159

150

149

140

141

136

129

134

133

119

123

118

102

2013

372

422

347

341

366

366

364

364

395

412

430

368

412

500

702

641

649

502

555

625

595

655

456

415

406

387

361

322

315

320

331

291

252

199

231

201

191

166

136

144

135

135

126

128

123

116

122

120

107

111

106

92

13 February 2014

105

86

96
112

90

133

Barclays | Equity Gilt Study

Real return on treasury bills - gross income re-invested


Average Annual Real Rate of Return
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961

0.7

1962

1.3

1.8

1963

1.5

1.8

1.9

1964

1.0

1.1

0.8 (0.4)

1965

1.1

1.2

1.1

0.7

1.7

1966

1.3

1.5

1.4

1.2

2.0

2.4

1967

1.6

1.8

1.8

1.8

2.5

2.9

3.4

1968

1.6

1.7

1.7

1.7

2.2

2.4

2.4

1.4

1969

1.8

1.9

1.9

1.9

2.4

2.6

2.6

2.3

3.1

1970

1.6

1.6

1.6

1.6

1.9

2.0

1.9

1.4

1.3 (0.4)

1971

1.2

1.2

1.1

1.1

1.3

1.2

0.9

0.4

0.0 (1.5) (2.6)

1972

0.9

0.9

0.8

0.7

0.8

0.7

0.4 (0.1) (0.5) (1.7) (2.3) (2.1)

1973

0.7

0.7

0.6

0.5

0.6

0.4

0.2 (0.4) (0.7) (1.6) (2.0) (1.7) (1.4)

1974

0.3

0.2

0.1 (0.1) (0.0) (0.2) (0.6) (1.1) (1.5) (2.4) (2.9) (3.0) (3.5) (5.5)

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
annual rate of return is calculated. Reading
the top figure in each column diagonally
down the table gives the real rate of return in
each year since 1960. The table can be used
to see the real rate of return over any period;
thus a purchase made at the end of 1963
would have lost 0.4% (allowing for
reinvestment of income) in one year but
over the first three years (up to the end of
1966) would have given an average annual
real return of 1.2%. Each figure on the
bottom line of the table shows the real
growth up to December 2013 from the year
shown below the figure.

1975 (0.6) (0.7) (0.8) (1.1) (1.1) (1.4) (1.8) (2.4) (3.0) (4.0) (4.7) (5.2) (6.2) (8.5) (11.3)
1976 (0.7) (0.8) (1.0) (1.2) (1.3) (1.6) (2.0) (2.5) (3.0) (3.9) (4.4) (4.8) (5.4) (6.8) (7.4) (3.2)
1977 (0.8) (0.9) (1.1) (1.3) (1.4) (1.6) (2.0) (2.5) (2.9) (3.7) (4.1) (4.4) (4.8) (5.7) (5.7) (2.8) (2.4)
1978 (0.8) (0.9) (1.1) (1.3) (1.3) (1.5) (1.9) (2.3) (2.7) (3.3) (3.7) (3.8) (4.1) (4.6) (4.4) (2.0) (1.4) (0.3)
1979 (0.9) (1.0) (1.2) (1.4) (1.4) (1.7) (2.0) (2.4) (2.7) (3.3) (3.6) (3.7) (4.0) (4.4) (4.2) (2.3) (2.0) (1.8) (3.2)

INVESTMENT TO END YEAR

1980 (0.8) (0.9) (1.0) (1.2) (1.2) (1.4) (1.7) (2.1) (2.4) (2.9) (3.1) (3.1) (3.3) (3.5) (3.2) (1.5) (1.1) (0.6) (0.8) 1.8
1981 (0.7) (0.8) (0.9) (1.0) (1.1) (1.3) (1.5) (1.8) (2.1) (2.5) (2.7) (2.7) (2.8) (2.9) (2.5) (1.0) (0.5) (0.1) (0.0) 1.7

1.5

1982 (0.4) (0.4) (0.5) (0.7) (0.7) (0.8) (1.0) (1.3) (1.5) (1.8) (1.9) (1.9) (1.9) (1.9) (1.4) 0.1

0.6

1.2

1.6

3.3

4.0

1983 (0.2) (0.2) (0.3) (0.4) (0.4) (0.5) (0.7) (0.9) (1.1) (1.4) (1.5) (1.4) (1.3) (1.3) (0.8) 0.6

1.2

1.8

2.2

3.6

4.2

5.6

4.6

1984

0.0

0.0 (0.1) (0.2) (0.1) (0.2) (0.4) (0.6) (0.7) (1.0) (1.0) (0.9) (0.8) (0.7) (0.3) 1.1

1.6

2.2

2.6

3.8

4.4

5.3

4.7

4.8

1985

0.3

0.2

0.2

0.1

0.1

0.0 (0.1) (0.3) (0.4) (0.6) (0.6) (0.4) (0.3) (0.2) 0.3

1.5

2.1

2.6

3.1

4.2

4.7

5.4

5.1

5.3

5.8

1986

0.5

0.5

0.5

0.4

0.4

0.4

0.3

0.1

0.0 (0.1) (0.1) 0.0

0.2

0.3

0.8

2.0

2.6

3.1

3.6

4.6

5.0

5.7

5.5

5.9

6.4

7.0

1987

0.7

0.7

0.7

0.6

0.7

0.6

0.5

0.4

0.3

0.2

0.2

0.4

0.6

0.7

1.2

2.3

2.8

3.4

3.8

4.7

5.1

5.7

5.6

5.8

6.2

6.3

5.7

1988

0.8

0.8

0.8

0.7

0.8

0.7

0.7

0.5

0.5

0.4

0.4

0.6

0.8

0.9

1.4

2.4

2.9

3.4

3.8

4.6

5.0

5.5

5.3

5.4

5.6

5.5

4.8

4.0

1989

1.0

1.0

1.0

1.0

1.0

1.0

0.9

0.8

0.8

0.7

0.7

0.9

1.1

1.2

1.7

2.7

3.2

3.7

4.0

4.8

5.1

5.6

5.4

5.6

5.8

5.7

5.3

5.2

6.4

1990

1.2

1.2

1.2

1.1

1.2

1.2

1.1

1.0

1.0

0.9

1.0

1.2

1.4

1.5

2.0

2.9

3.4

3.8

4.2

4.9

5.2

5.6

5.5

5.6

5.8

5.8

5.5

5.4

6.2

6.0

1991

1.3

1.4

1.4

1.3

1.4

1.4

1.3

1.3

1.3

1.2

1.2

1.4

1.6

1.8

2.3

3.2

3.6

4.1

4.4

5.1

5.4

5.8

5.7

5.8

5.9

6.0

5.8

5.8

6.4

6.4

6.8

1992

1.5

1.5

1.5

1.5

1.6

1.6

1.5

1.5

1.5

1.4

1.5

1.7

1.9

2.1

2.5

3.4

3.8

4.2

4.6

5.2

5.5

5.8

5.8

5.9

6.0

6.1

5.9

6.0

6.5

6.5

6.8

6.7

1993

1.6

1.6

1.6

1.6

1.7

1.7

1.6

1.6

1.6

1.5

1.6

1.8

2.0

2.1

2.6

3.4

3.8

4.2

4.5

5.1

5.3

5.7

5.6

5.7

5.8

5.8

5.6

5.6

5.9

5.8

5.8

5.3

3.9

1994

1.6

1.6

1.6

1.6

1.7

1.7

1.7

1.6

1.6

1.5

1.6

1.8

2.0

2.2

2.6

3.3

3.7

4.1

4.4

4.9

5.1

5.4

5.3

5.4

5.5

5.4

5.2

5.2

5.4

5.2

5.0

4.3

3.2

2.4

1995

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.7

1.6

1.7

1.9

2.1

2.2

2.6

3.4

3.7

4.1

4.3

4.8

5.0

5.3

5.2

5.2

5.3

5.2

5.0

4.9

5.1

4.9

4.6

4.1

3.2

2.9

3.4

1996

1.7

1.7

1.7

1.7

1.8

1.8

1.8

1.7

1.7

1.7

1.8

2.0

2.1

2.3

2.6

3.4

3.7

4.0

4.3

4.7

4.9

5.2

5.1

5.1

5.1

5.1

4.9

4.8

4.9

4.7

4.5

4.0

3.3

3.2

3.5

3.6

1997

1.7

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.7

1.8

2.0

2.2

2.3

2.7

3.4

3.7

4.0

4.2

4.7

4.8

5.0

4.9

5.0

5.0

4.9

4.7

4.6

4.7

4.5

4.3

3.9

3.3

3.2

3.4

3.4

3.1

1998

1.8

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

1.9

2.1

2.3

2.4

2.8

3.4

3.7

4.0

4.3

4.7

4.8

5.0

4.9

5.0

5.0

4.9

4.7

4.7

4.7

4.5

4.4

4.0

3.6

3.5

3.8

3.9

4.1

1999

1.9

1.9

1.9

1.9

2.0

2.0

2.0

1.9

2.0

1.9

2.0

2.2

2.3

2.5

2.8

3.4

3.7

4.0

4.2

4.6

4.8

5.0

4.9

4.9

4.9

4.8

4.7

4.6

4.6

4.5

4.3

4.0

3.6

3.5

3.8

3.9

3.9

4.4

3.7

2000

1.9

1.9

1.9

1.9

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.2

2.4

2.5

2.8

3.4

3.7

4.0

4.2

4.6

4.7

4.9

4.8

4.8

4.8

4.7

4.6

4.5

4.5

4.3

4.2

3.9

3.5

3.5

3.7

3.7

3.8

4.0

3.4

3.2

2001

2.0

2.0

2.0

2.0

2.1

2.1

2.1

2.1

2.1

2.0

2.1

2.3

2.4

2.6

2.9

3.5

3.8

4.0

4.2

4.6

4.7

4.9

4.8

4.8

4.8

4.7

4.6

4.5

4.5

4.4

4.2

4.0

3.7

3.7

3.8

3.9

4.0

4.2

3.9

4.0

4.8

2002

2.0

2.0

2.0

2.0

2.1

2.1

2.1

2.0

2.0

2.0

2.1

2.2

2.4

2.5

2.8

3.4

3.7

3.9

4.1

4.4

4.5

4.7

4.6

4.6

4.6

4.5

4.4

4.3

4.3

4.1

4.0

3.7

3.4

3.4

3.5

3.5

3.5

3.6

3.2

3.0

2.9

1.1

2003

1.9

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.1

2.2

2.3

2.5

2.8

3.3

3.6

3.8

4.0

4.3

4.4

4.5

4.4

4.4

4.4

4.3

4.1

4.1

4.1

3.9

3.7

3.5

3.2

3.1

3.2

3.2

3.1

3.1

2.7

2.5

2.3

1.0

0.9

2004

1.9

1.9

1.9

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.2

2.3

2.4

2.7

3.2

3.5

3.7

3.8

4.1

4.2

4.4

4.3

4.2

4.2

4.1

4.0

3.9

3.9

3.7

3.5

3.3

3.0

2.9

3.0

2.9

2.9

2.8

2.5

2.2

2.0

1.0

1.0

1.1

2005

1.9

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.2

2.3

2.4

2.7

3.2

3.4

3.7

3.8

4.1

4.2

4.3

4.2

4.2

4.1

4.1

3.9

3.8

3.8

3.6

3.5

3.3

3.0

2.9

3.0

2.9

2.8

2.8

2.5

2.3

2.1

1.5

1.6

1.9

2.7

2006

1.9

1.9

1.9

1.9

2.0

2.0

2.0

2.0

2.0

1.9

2.0

2.1

2.3

2.4

2.6

3.1

3.3

3.5

3.7

3.9

4.0

4.1

4.0

4.0

4.0

3.9

3.7

3.6

3.6

3.5

3.3

3.1

2.8

2.7

2.8

2.7

2.6

2.5

2.2

2.0

1.8

1.3

1.3

1.4

1.6

0.4

2007

1.9

1.9

1.9

1.9

2.0

2.0

2.0

1.9

2.0

1.9

2.0

2.1

2.2

2.4

2.6

3.1

3.3

3.5

3.6

3.9

3.9

4.0

3.9

3.9

3.9

3.8

3.6

3.5

3.5

3.4

3.2

3.0

2.7

2.7

2.7

2.6

2.5

2.5

2.2

2.0

1.8

1.3

1.4

1.5

1.6

1.1

1.8

2008

1.9

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.1

2.2

2.3

2.4

2.7

3.1

3.3

3.5

3.6

3.9

4.0

4.0

3.9

3.9

3.9

3.8

3.7

3.6

3.5

3.4

3.3

3.1

2.8

2.8

2.8

2.7

2.7

2.6

2.4

2.2

2.1

1.7

1.9

2.0

2.3

2.1

3.0

4.2

2009

1.9

1.9

1.9

1.9

1.9

2.0

1.9

1.9

1.9

1.9

2.0

2.1

2.2

2.3

2.5

3.0

3.2

3.3

3.5

3.7

3.8

3.8

3.7

3.7

3.7

3.6

3.4

3.3

3.3

3.1

3.0

2.8

2.6

2.5

2.5

2.4

2.3

2.3

2.0

1.8

1.7

1.3

1.3

1.4

1.5

1.2

1.4

1.2 (1.7)

2010

1.7

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.7

1.8

1.9

2.0

2.1

2.3

2.8

2.9

3.1

3.2

3.4

3.5

3.6

3.4

3.4

3.4

3.3

3.1

3.0

2.9

2.8

2.6

2.4

2.2

2.1

2.1

2.0

1.9

1.8

1.5

1.3

1.1

0.7

0.6

0.6

0.5

0.1

0.0 (0.6) (2.9) (4.1)

2011

1.6

1.6

1.6

1.6

1.7

1.7

1.7

1.6

1.6

1.6

1.7

1.8

1.9

1.9

2.2

2.6

2.7

2.9

3.0

3.2

3.2

3.3

3.2

3.1

3.1

3.0

2.8

2.7

2.6

2.5

2.3

2.1

1.8

1.7

1.7

1.6

1.4

1.3

1.0

0.8

0.6

0.2

0.1

0.0 (0.1) (0.6) (0.8) (1.5) (3.3) (4.1) (4.1)

2012

1.5

1.6

1.6

1.6

1.6

1.6

1.6

1.5

1.5

1.5

1.5

1.6

1.7

1.8

2.0

2.4

2.6

2.7

2.8

3.0

3.0

3.1

3.0

2.9

2.9

2.7

2.6

2.5

2.4

2.2

2.1

1.8

1.6

1.5

1.4

1.3

1.2

1.1

0.8

0.6

0.3 (0.1) (0.2) (0.3) (0.5) (0.9) (1.1) (1.7) (3.1) (3.6) (3.4) (2.7)

2013

1.5

1.5

1.5

1.5

1.5

1.5

1.5

1.4

1.4

1.4

1.5

1.6

1.6

1.7

1.9

2.3

2.4

2.6

2.7

2.8

2.9

2.9

2.8

2.7

2.7

2.6

2.4

2.3

2.2

2.0

1.9

1.7

1.4

1.3

1.2

1.1

1.0

0.8

0.6

0.3

0.1 (0.2) (0.4) (0.5) (0.7) (1.1) (1.3) (1.8) (3.0) (3.3) (3.0) (2.5) (2.3)

13 February 2014

6.6

5.0

134

Barclays | Equity Gilt Study


Real Value of 100 Invested
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961 101
1962 103 102
1963 104 104 102
1964 104 103 102 100
1965 106 105 103 101 102
1966 108 108 106 104 104 102
1967 112 111 109 107 108 106 103

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
change in real value is calculated. Reading the
top figure in each column diagonally down the
table gives the growth in each year since
1960. The table can be used to see the real
growth over any period; thus an investment of
100 made at the end of 1978 would have
fallen to 97 (allowing for reinvestment of
income and the effect of inflation) in one year
but after four years (up to the end of 1982)
would have reached 107 in real terms. Each
figure on the bottom line of the table shows
the real growth up to December 2013 from
the year shown below the figure.

1968 114 113 111 109 109 107 105 101


1969 117 116 114 112 113 111 108 105 103

INVESTMENT TO END YEAR

1970 117 116 114 112 112 110 108 104 103 100
1971 114 113 111 109 109 107 105 101 100

97

97

1972 111 110 109 106 107 105 103

99

98

95

95

98

1973 110 109 107 105 105 104 101

98

97

94

94

97

99

1974 104 103 101

99

100

98

96

92

91

88

89

91

93

94

1975

92

91

90

88

88

87

85

82

81

78

79

81

83

84

89

1976

89

88

87

85

85

84

82

79

78

76

76

78

80

81

86

97

1977

87

86

85

83

83

82

80

77

76

74

74

76

78

79

84

94

98

1978

86

86

84

83

83

82

80

77

76

74

74

76

78

79

83

94

97

1979

84

83

82

80

80

79

77

75

74

71

72

74

75

76

81

91

94

96

97

1980

85

85

83

82

82

80

79

76

75

73

73

75

77

78

82

93

96

98

98

1981

86

86

84

83

83

82

80

77

76

74

74

76

78

79

83

94

97

100 100 103 102

1982

92

92

90

88

89

87

85

82

81

79

79

81

83

84

89

100 104 106 107 110 108 107

1983

96

96

94

92

93

91

89

86

85

82

83

85

87

88

93

105 108 111 111 115 113 111 105

1984 101 100

99

97

97

95

93

90

89

86

87

89

91

92

98

110 114 116 117 121 119 117 110 105

1985 107 106 104 102 103 101

99

95

94

91

92

94

96

98

103 116 120 123 124 128 126 124 116 111 106

1986 114 114 112 109 110 108 106 102 101

98

98

101 103 104 110 124 129 132 132 137 134 132 124 119 113 107

100
102

1987 121 120 118 116 116 114 112 108 106 103 104 106 109 110 117 132 136 139 140 144 142 140 131 125 120 113 106
1988 126 125 123 120 121 119 116 112 111 107 108 111 113 115 121 137 141 145 145 150 148 145 136 130 124 118 110 104
1989 134 133 130 128 128 126 123 119 118 114 115 118 120 122 129 145 150 154 155 160 157 155 145 139 132 125 117 111 106
1990 142 141 138 136 136 134 131 126 125 121 121 125 127 129 137 154 159 163 164 169 166 164 154 147 140 132 124 117 113 106
1991 151 150 148 145 145 143 140 135 133 129 130 133 136 138 146 165 170 174 175 181 178 175 164 157 150 141 132 125 120 113 107
1992 161 160 157 155 155 152 149 144 142 138 138 142 145 147 156 176 182 186 187 193 190 187 175 167 160 151 141 134 128 121 114 107
1993 168 166 164 161 161 158 155 150 148 143 144 148 151 153 162 183 189 193 194 200 197 194 182 174 166 157 147 139 133 125 118 111 104
1994 172 171 168 164 165 162 159 153 151 147 147 151 154 157 166 187 193 198 199 205 202 199 186 178 170 161 150 142 137 129 121 114 106

102

1995 178 176 173 170 171 168 164 159 156 152 152 156 160 162 171 193 200 205 205 212 209 205 193 184 176 166 155 147 141 133 125 117 110

106 103

1996 184 183 180 176 177 174 170 164 162 157 158 162 166 168 178 200 207 212 213 220 216 213 200 191 182 172 161 152 146 138 130 122 114

110 107 104

1997 190 188 185 182 182 179 175 170 167 162 163 167 171 173 183 207 214 219 220 227 223 220 206 197 188 178 166 157 151 142 134 126 118

113 111 107 103

1998 199 198 195 191 192 188 184 178 176 170 171 176 179 182 192 217 224 230 231 238 234 231 216 207 197 187 174 165 159 149 141 132 124

119 116 112 108 105

1999 207 205 202 198 199 195 191 185 182 177 177 182 186 189 200 225 233 238 239 247 243 239 224 214 205 193 181 171 165 155 146 137 128

123 120 116 112 109 104

2000 213 212 208 204 205 202 197 190 188 182 183 188 192 195 206 232 240 246 247 255 250 247 231 221 211 200 187 177 170 160 151 141 132

127 124 120 116 112 107 103

2001 224 222 218 214 215 211 206 200 197 191 192 197 201 204 216 243 251 258 258 267 262 258 242 232 221 209 195 185 178 167 158 148 138

133 130 126 121 118 112 108 105

2002 226 224 221 216 217 214 209 202 199 193 194 199 203 206 218 246 254 261 261 270 265 261 245 234 224 211 198 187 180 169 160 149 140

135 132 127 123 119 113 109 106 101

2003 228 227 223 218 219 216 211 204 201 195 196 201 205 208 220 248 257 263 264 273 268 264 247 237 226 213 200 189 182 171 161 151 141

136 133 128 124 120 114 110 107 102 101

2004 231 229 225 221 222 218 213 206 203 197 198 203 207 210 223 251 259 266 267 276 271 267 250 239 228 216 202 191 184 173 163 152 143

137 134 130 125 121 116 112 108 103 102 101

2005 237 235 231 227 228 224 219 212 209 202 203 209 213 216 229 258 267 273 274 283 278 274 257 246 235 222 207 196 189 177 167 157 147

141 138 133 129 125 119 115 111 106 105 104 103

2006 238 236 232 228 229 225 220 212 210 203 204 210 214 217 230 259 268 274 275 284 279 275 258 247 236 223 208 197 189 178 168 157 147

142 139 134 129 125 119 115 112 106 105 104 103 100

2007 242 240 236 232 233 229 223 216 213 207 208 213 218 221 234 264 272 279 280 289 284 280 263 251 240 226 212 200 193 181 171 160 150

144 141 136 132 128 121 117 113 108 107 106 105 102 102

2008 252 251 246 242 243 238 233 225 222 216 216 222 227 230 244 275 284 291 292 302 296 292 274 262 250 236 221 209 201 189 178 167 156

150 147 142 137 133 127 122 118 113 112 111 109 107 106 104

2009 248 246 242 238 238 234 229 222 218 212 213 218 223 226 240 270 279 286 287 297 291 287 269 257 246 232 217 205 197 186 175 164 154

148 144 140 135 131 124 120 116 111 110 109 108 105 104 102

98

2010 238 236 232 228 229 225 220 213 210 203 204 210 214 217 230 259 268 274 275 284 279 275 258 247 236 223 208 197 189 178 168 157 147

142 139 134 129 125 119 115 112 106 105 104 103 100 100

98

94

96

2011 228 227 223 218 219 216 211 204 201 195 196 201 205 208 220 248 257 263 264 273 268 264 248 237 226 213 200 189 182 171 161 151 141

136 133 128 124 120 114 110 107 102 101 100

99

96

96

94

90

92

96

2012 222 221 217 213 213 210 205 198 196 190 190 196 200 203 214 242 250 256 257 265 261 257 241 230 220 208 194 184 177 166 157 147 138

132 129 125 121 117 111 107 104

99

98

97

96

94

93

92

88

90

93

97

2013 217 215 212 208 209 205 200 194 191 185 186 191 195 198 210 236 244 250 251 259 255 251 235 225 215 203 190 180 173 162 153 144 134

129 126 122 118 114 109 105 102

97

96

95

94

92

91

90

86

87

91

95

13 February 2014

98

135

Barclays | Equity Gilt Study

Real return on building society account - gross income re-invested


Average Annual Real Rate of Return
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961

1.4

1962

2.4

3.4

1963

2.9

3.6

3.9

1964

2.4

2.7

2.4

0.9

1965

2.3

2.5

2.2

1.4

1.9

1966

2.4

2.6

2.4

1.9

2.5

3.0

1967

2.7

3.0

2.9

2.6

3.2

3.8

4.7

1968

2.6

2.7

2.6

2.4

2.8

3.1

3.1

1.5

1969

2.7

2.8

2.8

2.6

2.9

3.2

3.2

2.5

3.5

1970

2.5

2.6

2.5

2.3

2.5

2.6

2.5

1.8

2.0

1971

2.2

2.2

2.1

1.9

2.0

2.1

1.9

1.2

1.1 (0.1) (0.7)

1972

2.0

2.1

2.0

1.7

1.8

1.8

1.6

1.0

0.9

1973

1.8

1.8

1.7

1.5

1.6

1.5

1.3

0.7

0.6 (0.1) (0.3) (0.2) (0.8)

1974

1.2

1.1

1.0

0.7

0.7

0.6

0.2 (0.4) (0.7) (1.5) (2.0) (2.4) (3.8) (6.8)

1975

0.3

0.2 (0.0) (0.3) (0.4) (0.7) (1.1) (1.8) (2.2) (3.2) (3.9) (4.7) (6.3) (9.0) (11.1)

1976

0.0 (0.1) (0.3) (0.6) (0.7) (1.0) (1.4) (2.0) (2.4) (3.3) (3.9) (4.5) (5.7) (7.3) (7.6) (3.8)

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
annual rate of return is calculated. Reading
the top figure in each column diagonally
down the table gives the real rate of return in
each year since 1960. The table can be used
to see the real rate of return over any period;
thus a purchase made at the end of 1960
would have grown by 1.4% (allowing for
reinvestment of income) in one year but
over the first three years (up to the end of
1963) would have given an average annual
real return of 2.9%. Each figure on the
bottom line of the table shows the real
growth up to December 2013 from the year
shown below the figure.

0.6
0.1 (0.1) 0.5

1977 (0.0) (0.1) (0.4) (0.7) (0.8) (1.0) (1.4) (1.9) (2.3) (3.0) (3.5) (4.0) (4.8) (5.8) (5.5) (2.6) (1.3)
1978

0.0 (0.1) (0.3) (0.6) (0.7) (0.9) (1.2) (1.7) (2.0) (2.6) (3.0) (3.3) (3.9) (4.5) (3.9) (1.4) (0.2) 1.0

1979 (0.2) (0.3) (0.5) (0.8) (0.9) (1.1) (1.4) (1.9) (2.2) (2.8) (3.1) (3.4) (4.0) (4.5) (4.0) (2.1) (1.6) (1.7) (4.3)

INVESTMENT TO END YEAR

1980 (0.2) (0.3) (0.5) (0.8) (0.9) (1.0) (1.3) (1.8) (2.0) (2.5) (2.8) (3.1) (3.5) (3.9) (3.4) (1.7) (1.2) (1.2) (2.2) (0.1)
1981 (0.2) (0.2) (0.4) (0.7) (0.8) (0.9) (1.2) (1.6) (1.8) (2.2) (2.5) (2.7) (3.0) (3.3) (2.8) (1.3) (0.8) (0.7) (1.2) 0.3

0.8

1982

0.1

0.1 (0.1) (0.3) (0.4) (0.5) (0.7) (1.1) (1.3) (1.6) (1.8) (1.9) (2.1) (2.3) (1.7) (0.3) 0.4

0.7

0.6

2.3

3.6

6.4

1983

0.3

0.2

0.1 (0.1) (0.1) (0.3) (0.4) (0.8) (0.9) (1.2) (1.3) (1.4) (1.6) (1.6) (1.1) 0.3

0.9

1.3

1.3

2.8

3.8

5.3

4.1

1984

0.5

0.5

0.3

0.2

0.1

0.0 (0.1) (0.4) (0.5) (0.8) (0.9) (0.9) (1.0) (1.0) (0.4) 0.8

1.4

1.8

2.0

3.2

4.1

5.2

4.6

5.2

1985

0.7

0.6

0.5

0.4

0.3

0.3

0.1 (0.1) (0.2) (0.5) (0.5) (0.5) (0.6) (0.6) 0.0

1.2

1.8

2.2

2.4

3.5

4.3

5.1

4.7

5.0

4.8

1986

0.9

0.9

0.8

0.6

0.6

0.6

0.4

0.2

0.1 (0.1) (0.1) (0.0) (0.1) (0.0) 0.6

1.7

2.3

2.7

2.9

3.9

4.6

5.4

5.2

5.5

5.7

6.6

1987

1.1

1.0

1.0

0.8

0.8

0.8

0.7

0.5

0.4

0.3

0.2

0.3

0.3

0.4

0.9

2.0

2.6

3.0

3.2

4.2

4.8

5.5

5.3

5.6

5.7

6.2

5.7

1988

1.1

1.1

1.0

0.9

0.9

0.8

0.7

0.5

0.5

0.3

0.3

0.4

0.4

0.4

1.0

2.0

2.5

2.8

3.0

3.9

4.4

4.9

4.6

4.7

4.6

4.5

3.5

1.4

1989

1.1

1.1

1.0

0.9

0.9

0.9

0.8

0.6

0.6

0.4

0.4

0.5

0.5

0.6

1.1

2.0

2.5

2.8

3.0

3.7

4.2

4.6

4.4

4.4

4.3

4.1

3.3

2.1

2.8

1990

1.2

1.2

1.1

1.0

1.0

1.0

0.9

0.7

0.7

0.5

0.5

0.6

0.6

0.7

1.2

2.1

2.5

2.8

2.9

3.6

4.0

4.4

4.1

4.1

4.0

3.8

3.1

2.2

2.6

2.5

1991

1.3

1.3

1.2

1.1

1.1

1.1

1.0

0.9

0.8

0.7

0.7

0.8

0.8

0.9

1.4

2.2

2.6

2.9

3.1

3.7

4.1

4.4

4.2

4.2

4.1

3.9

3.4

2.8

3.3

3.6

4.6

1992

1.5

1.5

1.4

1.3

1.3

1.3

1.2

1.1

1.1

1.0

1.0

1.1

1.1

1.2

1.7

2.5

2.9

3.2

3.3

4.0

4.3

4.6

4.4

4.5

4.4

4.3

4.0

3.6

4.2

4.6

5.7

6.8

1993

1.5

1.5

1.4

1.3

1.4

1.3

1.3

1.1

1.1

1.0

1.0

1.1

1.2

1.3

1.7

2.5

2.9

3.1

3.3

3.8

4.1

4.4

4.2

4.2

4.1

4.1

3.7

3.4

3.8

4.0

4.5

4.5

2.2

1994

1.5

1.5

1.4

1.3

1.3

1.3

1.3

1.1

1.1

1.0

1.0

1.1

1.1

1.2

1.7

2.4

2.7

3.0

3.1

3.6

3.9

4.1

3.9

3.9

3.8

3.7

3.3

3.0

3.3

3.4

3.6

3.2

1.5

0.8

1995

1.4

1.4

1.4

1.3

1.3

1.3

1.2

1.1

1.1

1.0

1.0

1.1

1.1

1.2

1.6

2.3

2.6

2.9

3.0

3.4

3.7

3.9

3.7

3.7

3.5

3.4

3.0

2.7

2.9

2.9

3.0

2.6

1.2

0.7

0.7

1996

1.4

1.4

1.3

1.3

1.3

1.3

1.2

1.1

1.1

1.0

1.0

1.1

1.1

1.2

1.5

2.2

2.5

2.7

2.8

3.2

3.4

3.6

3.4

3.4

3.2

3.1

2.7

2.4

2.5

2.5

2.5

2.1

0.9

0.5

0.4

1997

1.3

1.3

1.3

1.2

1.2

1.2

1.1

1.0

1.0

0.9

0.9

1.0

1.0

1.1

1.5

2.1

2.4

2.5

2.6

3.0

3.2

3.4

3.2

3.1

2.9

2.8

2.4

2.1

2.2

2.1

2.1

1.7

0.6

0.3

0.1 (0.2) (0.5)

1998

1.4

1.4

1.4

1.3

1.3

1.3

1.2

1.1

1.1

1.0

1.0

1.1

1.1

1.2

1.6

2.2

2.4

2.6

2.7

3.1

3.3

3.4

3.2

3.2

3.0

2.9

2.6

2.3

2.4

2.4

2.3

2.0

1.2

1.0

1.1

1.2

1.8

1999

1.5

1.5

1.4

1.3

1.4

1.3

1.3

1.2

1.2

1.1

1.1

1.2

1.2

1.3

1.6

2.2

2.5

2.6

2.7

3.1

3.3

3.4

3.2

3.2

3.0

2.9

2.6

2.4

2.5

2.4

2.4

2.2

1.5

1.4

1.5

1.8

2.3

3.7

3.3

2000

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.2

1.2

1.2

1.2

1.2

1.3

1.3

1.7

2.2

2.5

2.6

2.7

3.1

3.2

3.4

3.2

3.1

3.0

2.9

2.6

2.4

2.5

2.4

2.4

2.2

1.6

1.6

1.7

1.9

2.3

3.3

2.9

2.5

2001

1.6

1.6

1.5

1.4

1.5

1.4

1.4

1.3

1.3

1.2

1.3

1.3

1.4

1.4

1.8

2.3

2.5

2.7

2.8

3.1

3.3

3.4

3.2

3.2

3.1

3.0

2.7

2.5

2.6

2.6

2.6

2.4

1.9

1.9

2.0

2.2

2.7

3.5

3.3

3.2

4.0

2002

1.5

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.3

1.2

1.2

1.3

1.3

1.4

1.7

2.2

2.5

2.6

2.7

3.0

3.1

3.2

3.1

3.0

2.9

2.8

2.6

2.4

2.4

2.4

2.4

2.2

1.8

1.7

1.8

2.0

2.3

2.9

2.5

2.3

2.2

0.4

2003

1.5

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.3

1.2

1.2

1.3

1.3

1.4

1.7

2.2

2.4

2.5

2.6

2.9

3.0

3.1

3.0

2.9

2.8

2.7

2.5

2.2

2.3

2.3

2.3

2.1

1.6

1.6

1.7

1.8

2.0

2.5

2.1

1.8

1.6

0.5

0.5

2004

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.2

1.2

1.2

1.2

1.3

1.3

1.3

1.6

2.1

2.3

2.5

2.5

2.8

2.9

3.0

2.9

2.8

2.7

2.6

2.4

2.2

2.2

2.2

2.1

2.0

1.6

1.5

1.6

1.7

1.9

2.2

1.9

1.6

1.4

0.6

0.6

0.7

2005

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.3

1.3

1.2

1.2

1.3

1.3

1.4

1.6

2.1

2.3

2.4

2.5

2.8

2.9

3.0

2.8

2.8

2.6

2.5

2.3

2.1

2.2

2.1

2.1

1.9

1.6

1.5

1.6

1.7

1.8

2.2

1.9

1.6

1.5

0.8

1.0

1.2

1.7

2006

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.2

1.2

1.2

1.2

1.2

1.3

1.3

1.6

2.0

2.2

2.3

2.4

2.6

2.8

2.8

2.7

2.6

2.5

2.4

2.2

2.0

2.1

2.0

2.0

1.8

1.5

1.4

1.4

1.5

1.7

1.9

1.6

1.4

1.2

0.7

0.7

0.8

0.8 (0.1)

2007

1.4

1.4

1.4

1.3

1.3

1.3

1.3

1.2

1.2

1.1

1.2

1.2

1.2

1.3

1.6

2.0

2.2

2.3

2.3

2.6

2.7

2.8

2.6

2.5

2.4

2.3

2.1

1.9

2.0

1.9

1.9

1.7

1.4

1.3

1.4

1.4

1.6

1.8

1.5

1.3

1.1

0.7

0.7

0.8

0.8

0.3

0.7

2008

1.4

1.4

1.4

1.3

1.3

1.3

1.3

1.2

1.2

1.1

1.1

1.2

1.2

1.3

1.5

1.9

2.1

2.2

2.3

2.5

2.6

2.6

2.5

2.4

2.3

2.2

2.0

1.9

1.9

1.8

1.8

1.6

1.3

1.3

1.3

1.3

1.4

1.6

1.4

1.1

1.0

0.6

0.6

0.6

0.6

0.2

0.3 (0.1)

2009

1.3

1.3

1.3

1.2

1.2

1.2

1.2

1.1

1.1

1.0

1.0

1.1

1.1

1.2

1.4

1.8

2.0

2.1

2.1

2.3

2.4

2.5

2.3

2.3

2.1

2.0

1.8

1.7

1.7

1.6

1.6

1.4

1.1

1.0

1.1

1.1

1.2

1.3

1.0

0.8

0.6

0.2

0.2

0.1

0.0 (0.4) (0.5) (1.1) (2.1)

2010

1.2

1.2

1.2

1.1

1.1

1.1

1.1

1.0

1.0

0.9

0.9

0.9

1.0

1.0

1.2

1.6

1.8

1.9

1.9

2.1

2.2

2.2

2.1

2.0

1.9

1.8

1.6

1.4

1.4

1.3

1.3

1.1

0.8

0.7

0.7

0.7

0.7

0.8

0.6

0.3

0.1 (0.3) (0.4) (0.5) (0.7) (1.2) (1.5) (2.2) (3.2) (4.4)

2011

1.1

1.1

1.0

1.0

1.0

1.0

0.9

0.8

0.8

0.8

0.8

0.8

0.8

0.9

1.1

1.4

1.6

1.7

1.7

1.9

2.0

2.0

1.9

1.8

1.6

1.5

1.3

1.1

1.1

1.1

1.0

0.8

0.5

0.4

0.4

0.4

0.4

0.5

0.2 (0.1) (0.3) (0.7) (0.8) (1.0) (1.3) (1.7) (2.1) (2.8) (3.6) (4.4) (4.4)

2012

1.0

1.0

1.0

0.9

0.9

0.9

0.8

0.8

0.7

0.7

0.7

0.7

0.7

0.8

1.0

1.3

1.5

1.5

1.6

1.8

1.8

1.8

1.7

1.6

1.5

1.4

1.2

1.0

1.0

0.9

0.8

0.6

0.3

0.2

0.2

0.2

0.2

0.2 (0.0) (0.3) (0.5) (0.9) (1.0) (1.2) (1.5) (1.9) (2.2) (2.8) (3.4) (3.9) (3.6) (2.8)

2013

1.0

1.0

0.9

0.8

0.8

0.8

0.8

0.7

0.7

0.6

0.6

0.6

0.6

0.7

0.9

1.2

1.4

1.4

1.5

1.6

1.7

1.7

1.6

1.5

1.3

1.2

1.0

0.9

0.8

0.8

0.7

0.5

0.2

0.1

0.1

0.0

0.0

0.1 (0.2) (0.4) (0.7) (1.0) (1.2) (1.3) (1.6) (2.0) (2.2) (2.7) (3.2) (3.5) (3.2) (2.6) (2.4)

13 February 2014

0.2
4.2

136

Barclays | Equity Gilt Study


Real Value of 100 Invested
INVESTMENT FROM END YEAR
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1961 101
1962 105 103
1963 109 107 104
1964 110 108 105 101
1965 112 110 107 103 102
1966 115 114 110 106 105 103
1967 121 119 115 111 110 108 105

The dates along the top (and bottom) are


those on which each portfolio starts. Those
down the side are the dates to which the
change in real value is calculated. Reading the
top figure in each column diagonally down the
table gives the growth in each year since
1960. The table can be used to see the real
growth over any period; thus an investment of
100 made at the end of 1960 would have
grown to 101 (allowing for reinvestment of
income and the effect of inflation) in one year
but after three years (up to the end of 1963)
would have reached 109 in real terms. Each
figure on the bottom line of the table shows
the real growth up to December 2013 from
the year shown below the figure.

1968 123 121 117 113 112 109 106 101


1969 127 125 121 116 115 113 110 105 103
1970 127 126 122 117 116 114 111 106 104 101
1971 127 125 121 116 115 113 110 105 103 100

99

INVESTMENT TO END YEAR

1972 127 125 121 117 116 114 110 105 104 100 100 100
1973 126 124 120 116 115 113 109 105 103 100

99

100

99

1974 118 116 112 108 107 105 102

97

96

93

92

93

92

93

1975 105 103 100

96

95

93

91

87

85

82

82

83

82

83

89

1976 101

99

96

92

92

90

87

83

82

79

79

79

79

80

85

96

1977

99

98

95

91

90

89

86

82

81

78

78

78

78

79

84

95

99

1978 100

99

96

92

91

89

87

83

82

79

79

79

79

79

85

96

100 101

1979

96

95

91

88

87

86

83

79

78

76

75

76

75

76

81

92

95

97

96

1980

96

94

91

88

87

86

83

79

78

76

75

76

75

76

81

92

95

97

96

100

1981

97

95

92

89

88

86

84

80

79

76

76

76

76

76

82

92

96

97

96

101 101

1982 103 101

98

94

94

92

89

85

84

81

81

81

81

81

87

98

102 104 103 107 107 106

1983 107 105 102

98

97

96

93

89

87

84

84

84

84

85

91

102 106 108 107 112 112 111 104

1984 112 111 107 103 102 100

98

93

92

89

88

89

88

89

96

108 112 113 112 117 117 117 109 105

1985 118 116 112 108 107 105 102

98

96

93

92

93

93

93

100 113 117 119 118 123 123 122 115 110 105

1986 126 124 120 115 114 112 109 104 103

99

99

99

99

100 107 120 125 127 126 131 131 130 122 118 112 107

1987 133 131 127 122 121 119 115 110 108 105 104 105 105 105 113 127 132 134 133 139 139 138 129 124 118 113 106
1988 135 133 129 124 123 120 117 112 110 106 106 106 106 107 115 129 134 136 135 141 141 140 131 126 120 114 107 101
1989 138 137 132 127 126 124 120 115 113 109 109 109 109 110 118 132 138 140 138 144 145 144 135 130 123 117 110 104 103
1990 142 140 135 130 129 127 123 118 116 112 111 112 112 112 121 136 141 143 142 148 148 147 138 133 126 120 113 107 105 102
1991 149 146 142 136 135 133 129 123 121 117 116 117 117 118 126 142 148 150 148 155 155 154 145 139 132 126 118 112 110 107 105
1992 159 156 151 146 144 142 138 131 129 125 124 125 125 126 135 152 158 160 158 166 166 164 154 148 141 135 126 119 118 115 112 107
1993 162 160 155 149 148 145 141 134 132 128 127 128 127 128 138 155 161 163 162 169 169 168 158 152 144 137 129 122 120 117 114 109 102
1994 163 161 156 150 149 146 142 135 133 129 128 129 128 129 139 156 163 165 163 170 171 169 159 153 145 139 130 123 121 118 115 110 103

101

1995 164 162 157 151 150 147 143 136 134 130 129 130 129 130 140 157 164 166 164 172 172 170 160 154 146 139 131 124 122 119 116 111 104

101 101

1996 165 162 157 151 150 147 143 136 134 130 129 130 130 131 140 158 164 166 165 172 172 171 160 154 146 140 131 124 122 119 116 111 104

102 101 100

1997 164 162 156 150 149 146 142 136 134 129 129 129 129 130 139 157 163 165 164 171 171 170 160 153 146 139 130 123 122 118 115 110 103

101 100 100

1998 171 168 163 157 155 152 148 141 139 135 134 135 134 135 145 163 170 172 170 178 178 177 166 160 152 145 136 128 127 123 120 115 108

105 104 104 104 104

1999 176 174 168 162 161 157 153 146 144 139 138 139 139 140 150 169 175 178 176 184 184 183 172 165 157 150 140 133 131 127 124 119 111

109 108 107 107 108 103

2000 181 178 172 166 165 161 157 150 148 143 142 143 142 143 154 173 180 182 180 189 189 187 176 169 161 153 144 136 134 130 127 122 114

111 111 110 110 110 106 102

2001 188 185 179 173 171 168 163 156 153 148 147 148 148 149 160 180 187 189 188 196 196 195 183 176 167 159 150 141 139 136 132 127 118

116 115 114 114 115 110 107 104

2002 189 186 180 173 172 169 164 156 154 149 148 149 148 150 160 181 188 190 188 197 197 196 184 176 168 160 150 142 140 136 133 127 119

116 116 115 115 115 111 107 104 100

2003 190 187 181 174 173 169 164 157 155 150 149 150 149 150 161 181 189 191 189 198 198 197 185 177 169 161 151 143 141 137 134 128 120

117 116 115 115 116 111 108 105 101 101

2004 191 188 182 175 174 171 166 158 156 151 150 151 150 151 162 183 190 193 191 199 200 198 186 179 170 162 152 144 142 138 135 129 120

118 117 116 116 117 112 108 106 102 101 101

2005 194 192 185 178 177 174 168 161 159 153 152 154 153 154 165 186 193 196 194 203 203 201 189 182 173 165 155 146 144 140 137 131 122

120 119 118 118 119 114 110 108 103 103 102 102

2006 194 191 185 178 177 173 168 161 158 153 152 153 153 154 165 186 193 196 194 203 203 201 189 182 173 165 154 146 144 140 137 131 122

120 119 118 118 119 114 110 107 103 103 102 102 100

2007 195 193 187 180 178 175 170 162 160 154 153 154 154 155 166 187 194 197 195 204 204 203 190 183 174 166 156 147 145 141 138 132 123

121 120 119 119 119 115 111 108 104 104 103 102 101 101

2008 195 193 186 179 178 174 169 162 159 154 153 154 154 155 166 187 194 197 195 204 204 202 190 183 174 166 155 147 145 141 138 132 123

120 120 119 119 119 114 111 108 104 103 103 102 101 101 100

99

2009 191 189 182 176 174 171 166 158 156 151 150 151 150 152 163 183 190 193 191 200 200 198 186 179 170 162 152 144 142 138 135 129 121

118 117 116 116 117 112 108 106 102 101 101 100

98

98

98

98

2010 183 180 174 168 166 163 159 151 149 144 143 144 144 145 155 175 182 184 183 191 191 189 178 171 163 155 146 138 136 132 129 123 115

113 112 111 111 112 107 104 101

97

97

96

96

94

94

94

94

96

2011 175 172 167 161 159 156 152 145 143 138 137 138 137 139 149 167 174 176 175 182 183 181 170 163 155 148 139 132 130 126 123 118 110

108 107 106 106 107 102

99

97

93

93

92

92

90

90

89

90

91

96

2012 170 168 162 156 155 152 147 141 139 134 133 134 134 135 144 163 169 171 170 177 177 176 165 159 151 144 135 128 126 123 120 114 107

105 104 103 103 104 100

96

94

90

90

90

89

87

88

87

87

89

93

97

2013 166 164 158 152 151 148 144 137 135 131 130 131 130 131 141 159 165 167 166 173 173 172 161 155 147 141 132 125 123 120 117 112 105

102 102 101 101 101

94

92

88

88

87

87

85

85

85

85

87

91

95

13 February 2014

97

98

137

Barclays | Equity Gilt Study

Real return on index-linked gilts


Average Annual Real Rate of Return
GROSS INCOME RE-INVESTED

INVESTMENT TO END YEAR

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1983

(4.3)

1984

(1.2)

1.9

1985

(2.7)

(1.9)

(5.5)

1986

(1.5)

(0.5)

(1.7)

2.3

1987

(0.6)

0.4

(0.1)

2.7

3.1

1988

0.6

1.6

1.5

3.9

4.8

1989

1.4

2.3

2.4

4.5

5.3

6.4

6.3

1990

0.6

1.3

1.2

2.7

2.7

2.6

0.8

(4.5)

1991

0.6

1.3

1.2

2.3

2.3

2.2

0.7

(1.9)

1992

1.9

2.6

2.7

3.9

4.2

4.4

3.9

3.2

7.2

14.1

1993

3.3

4.1

4.4

5.7

6.2

6.7

6.8

6.9

11.0

16.5

18.9

1994

2.1

2.7

2.8

3.8

3.9

4.1

3.7

3.1

5.2

6.7

3.1

(10.5)

1995

2.6

3.2

3.3

4.2

4.4

4.6

4.3

4.0

5.8

7.1

4.9

(1.5)

8.5

1996

2.7

3.2

3.3

4.2

4.4

4.5

4.3

4.0

5.5

6.5

4.6

0.3

6.2

1997

3.1

3.7

3.8

4.6

4.8

5.0

4.8

4.7

6.0

7.0

5.6

2.5

7.3

6.7

9.4

1998

3.9

4.5

4.7

5.5

5.8

6.1

6.0

6.0

7.4

8.3

7.4

5.3

9.6

10.0

13.2

1999

3.9

4.4

4.6

5.4

5.6

5.8

5.7

5.7

6.9

7.7

6.8

4.9

8.3

8.3

9.7

9.9

3.2

2000

3.7

4.2

4.3

5.0

5.2

5.4

5.3

5.2

6.2

6.8

5.9

4.2

6.9

6.6

7.2

6.5

1.6

0.1

2001

3.4

3.8

4.0

4.6

4.7

4.8

4.7

4.6

5.5

5.9

5.1

3.5

5.6

5.2

5.4

4.4

0.5

(0.7)

(1.6)

2002

3.5

3.9

4.0

4.6

4.7

4.9

4.7

4.6

5.4

5.9

5.1

3.6

5.6

5.2

5.4

4.6

1.7

1.2

1.7

5.1

2003

3.5

3.9

4.0

4.6

4.7

4.8

4.7

4.6

5.3

5.7

5.0

3.7

5.4

5.0

5.1

4.4

2.1

1.8

2.4

4.5

3.9

2004

3.6

4.0

4.1

4.6

4.7

4.8

4.7

4.6

5.3

5.6

5.0

3.8

5.3

5.0

5.1

4.5

2.6

2.4

3.0

4.6

4.4

4.9

2005

3.7

4.1

4.2

4.7

4.8

4.9

4.8

4.7

5.4

5.7

5.1

4.0

5.5

5.2

5.3

4.8

3.2

3.2

3.8

5.2

5.2

5.8

6.7

2006

3.5

3.8

3.9

4.4

4.5

4.5

4.4

4.3

4.9

5.2

4.6

3.5

4.8

4.5

4.5

4.0

2.5

2.4

2.8

3.7

3.3

3.1

2.2

(2.1)

2007

3.4

3.7

3.8

4.2

4.3

4.4

4.3

4.2

4.7

4.9

4.4

3.4

4.5

4.2

4.3

3.7

2.4

2.3

2.6

3.3

2.9

2.7

2.0

(0.3)

1.4

2008

3.2

3.5

3.5

3.9

4.0

4.1

3.9

3.8

4.3

4.5

3.9

3.0

4.1

3.7

3.7

3.2

1.9

1.8

2.0

2.5

2.1

1.7

0.9

(0.9)

(0.4)

2009

3.2

3.4

3.5

3.9

4.0

4.0

3.9

3.8

4.2

4.4

3.9

3.0

4.0

3.7

3.7

3.2

2.0

1.9

2.1

2.6

2.2

2.0

1.4

0.1

0.8

0.5

3.1

2010

3.2

3.5

3.6

4.0

4.0

4.1

4.0

3.9

4.3

4.5

4.0

3.2

4.1

3.8

3.8

3.4

2.3

2.2

2.4

2.9

2.6

2.4

2.0

1.1

1.9

2.1

4.2

5.3

2011

3.6

3.9

4.0

4.3

4.4

4.5

4.4

4.3

4.8

5.0

4.5

3.8

4.7

4.4

4.5

4.1

3.2

3.2

3.5

4.0

3.9

3.9

3.7

3.2

4.3

5.0

7.5

9.8

14.4

2012

3.5

3.8

3.8

4.2

4.3

4.3

4.2

4.1

4.5

4.7

4.3

3.6

4.4

4.2

4.2

3.8

3.0

2.9

3.2

3.6

3.5

3.4

3.3

2.8

3.6

4.0

5.6

6.5

7.1

0.2

2013

3.2

3.5

3.5

3.9

3.9

4.0

3.9

3.8

4.2

4.3

3.9

3.2

4.0

3.7

3.7

3.3

2.5

2.4

2.6

3.0

2.8

2.7

2.4

1.9

2.5

2.7

3.7

3.8

3.3

(1.8)

13 February 2014

2012

6.5

0.7

4.0
17.1

(2.1)

(3.9)

138

Barclays | Equity Gilt Study


Real Value of 100 Invested
GROSS INCOME RE-INVESTED

INVESTMENT TO END YEAR

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1983

96

1984

98

102

1985

92

96

1986

94

98

97

102

1987

97

102

100

105

103

1988

103

108

106

112

110

1989

110

115

113

119

117

113

106

1990

105

110

108

114

111

108

102

1991

106

111

108

115

112

109

102

96

101

1992

121

126

124

131

128

124

117

110

115

114

1993

144

150

147

156

152

148

139

130

137

136

119

1994

128

134

132

139

136

132

124

117

122

121

106

1995

139

146

143

151

148

143

135

127

133

132

115

97

108

1996

145

151

148

157

154

149

140

132

138

137

120

101

113

104

1997

158

166

162

172

168

163

153

144

151

150

131

110

123

114

109

1998

186

194

190

201

197

191

179

169

177

175

154

129

144

133

128

1999

191

200

196

208

203

197

185

174

182

181

158

133

149

137

132

121

103

2000

192

200

196

208

203

197

185

174

182

181

159

133

149

138

132

121

103

2001

189

197

193

205

200

194

182

171

179

178

156

131

147

135

130

119

102

99

98

2002

198

207

203

215

210

204

191

180

189

187

164

138

154

142

137

125

107

104

103

105

2003

206

215

211

223

218

212

199

187

196

194

170

143

160

148

142

130

111

108

107

109

104

2004

216

226

221

234

229

222

209

196

206

204

179

150

168

155

149

136

116

113

113

115

109

105

2005

231

241

236

250

244

237

223

210

219

218

191

161

179

165

159

145

124

120

120

122

116

112

107

2006

226

236

231

245

239

232

218

205

215

213

187

157

176

162

156

142

122

118

118

120

114

110

105

98

2007

229

239

235

248

243

236

221

208

218

216

190

160

178

164

158

144

123

120

119

121

116

111

106

99

2008

224

234

230

243

238

231

217

204

213

212

186

156

175

161

155

141

121

117

117

119

113

109

104

97

99

98

2009

231

241

237

251

245

238

223

210

220

218

191

161

180

166

160

146

125

121

121

123

117

112

107

100

102

101

103

2010

243

254

249

264

258

250

235

221

232

230

202

170

190

175

168

154

131

127

127

129

123

118

113

106

108

106

109

105

2011

278

291

285

302

295

287

269

253

265

263

231

194

217

200

192

176

150

146

145

148

141

135

129

121

123

122

124

121

114

2012

279

292

286

303

296

287

270

254

266

264

231

194

217

200

193

176

150

146

146

148

141

136

129

121

124

122

124

121

115

100

2013

268

280

275

291

285

276

259

244

255

254

222

187

209

193

185

169

145

140

140

142

135

130

124

116

119

117

120

116

110

96

13 February 2014

2012

94

106
95

89

117
100

101

96

139

UK real return on equities - gross income re-invested


(annual average rates of return between year ends)
1899

1900

1901

1902

11.5
3.7
3.6
3.2
4.9
4.8
6.6
4.5
4.2
4.9
4.6
4.1
3.8
3.3
3.0
1.6
0.4
(0.2)
0.1
0.4
(1.6)
(0.2)
1.3
1.4
2.0
2.5
2.6
3.0
3.5
2.8
2.9
2.2
3.1
3.7
4.0
4.2
4.5
3.8
3.5
3.2
2.7
27
3.1
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.3
3.1
3.4
4.0
4.0
3.7
3.6
4.2
4.9
4.8
4.7
4.5
4.7
4.5
4.5
4.3
4.7
5.1
4.8
4.6
4.9
5.0
4.3
3.0
3.9
3.7
4.1
4.0
3.9
4.0
4.0
4.2
4.4
4.6
4.7
4.9
4.9
4.9
5.1
4.9
5.0
5.1
5.3
5.1
5.3
5.3
5.5
5.5
5.7
5.5
5.3
5.0
5.1
5.1
5.2
5.3
5.3
4.9
5.0
5.1
4.9
5.0
5.1
51

(3.5)
(0.1)
0.5
3.4
3.5
5.8
3.6
3.4
4.2
4.0
3.5
3.2
2.7
2.4
1.0
(0.3)
(0.8)
(0.5)
(0.1)
(2.2)
(0.7)
0.9
0.9
1.6
2.2
2.3
2.7
3.2
2.6
2.6
1.9
2.9
3.5
3.8
4.0
4.3
3.6
3.3
3.0
2.5
25
2.9
3.2
3.4
3.6
3.6
3.9
3.7
3.4
3.2
3.2
3.1
2.9
3.3
3.9
3.9
3.6
3.4
4.1
4.8
4.7
4.6
4.4
4.6
4.4
4.4
4.2
4.6
5.0
4.7
4.5
4.8
4.9
4.2
2.9
3.8
3.6
4.0
3.9
3.8
4.0
3.9
4.1
4.3
4.6
4.7
4.9
4.9
4.8
5.1
4.8
4.9
5.0
5.2
5.1
5.2
5.3
5.4
5.5
5.6
5.5
5.3
4.9
5.0
5.1
5.2
5.2
5.2
4.8
5.0
5.0
4.9
4.9
5.0
50

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

1917

1918

3.5
2.6
5.7
5.3
7.8
4.8
4.4
5.2
4.8
4.2
3.8
3.2
2.9
1.3
(0.0)
(0.7)
(0.3)
0.1
(2.1)
(0.5)
1.1
1.1
1.8
2.4
2.5
3.0
3.5
2.8
2.8
2.1
3.1
3.7
4.0
4.2
4.5
3.8
3.5
3.2
2.7
27
3.0
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.3
3.1
3.4
4.0
4.1
3.7
3.6
4.2
4.9
4.8
4.7
4.6
4.8
4.5
4.6
4.4
4.7
5.2
4.8
4.6
5.0
5.0
4.3
3.0
3.9
3.7
4.1
4.0
3.9
4.0
4.0
4.2
4.4
4.7
4.8
5.0
5.0
4.9
5.2
4.9
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.7
5.6
5.3
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.1
5.1
5.0
5.0
5.1
51

1.8
6.9
5.9
8.9
5.1
4.5
5.4
5.0
4.3
3.8
3.2
2.8
1.2
(0.3)
(0.9)
(0.6)
(0.1)
(2.4)
(0.8)
0.9
1.0
1.7
2.4
2.5
3.0
3.5
2.8
2.8
2.1
3.1
3.7
4.0
4.2
4.6
3.8
3.5
3.2
2.6
26
3.0
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.2
3.1
3.4
4.1
4.1
3.8
3.6
4.2
4.9
4.8
4.7
4.6
4.8
4.5
4.6
4.4
4.7
5.2
4.9
4.6
5.0
5.0
4.3
3.0
3.9
3.7
4.1
4.0
3.9
4.1
4.0
4.2
4.4
4.7
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.7
5.6
5.4
5.0
5.1
5.2
5.3
5.3
5.3
4.9
5.1
5.1
5.0
5.0
5.1
51

12.3
8.0
11.4
5.9
5.1
6.1
5.5
4.6
4.1
3.3
2.9
1.1
(0.4)
(1.1)
(0.7)
(0.2)
(2.6)
(0.9)
0.9
1.0
1.7
2.4
2.5
3.0
3.5
2.8
2.8
2.1
3.1
3.8
4.1
4.3
4.6
3.9
3.5
3.2
2.7
27
3.1
3.4
3.6
3.8
3.8
4.1
3.9
3.6
3.3
3.4
3.3
3.1
3.4
4.1
4.1
3.8
3.6
4.2
5.0
4.9
4.8
4.6
4.8
4.6
4.6
4.4
4.8
5.3
4.9
4.7
5.0
5.1
4.4
3.0
4.0
3.8
4.1
4.0
3.9
4.1
4.0
4.3
4.5
4.7
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.2
5.4
5.2
5.4
5.4
5.6
5.6
5.8
5.6
5.4
5.0
5.2
5.2
5.3
5.4
5.3
4.9
5.1
5.1
5.0
5.0
5.1
51

3.8
11.0
3.9
3.4
4.8
4.4
3.5
3.1
2.3
2.1
0.1
(1.4)
(2.1)
(1.6)
(1.0)
(3.5)
(1.6)
0.3
0.4
1.2
1.9
2.1
2.6
3.2
2.4
2.5
1.7
2.8
3.5
3.8
4.1
4.4
3.7
3.3
3.0
2.4
24
2.8
3.2
3.4
3.6
3.6
4.0
3.7
3.4
3.1
3.2
3.1
2.9
3.3
3.9
4.0
3.6
3.5
4.1
4.9
4.8
4.6
4.5
4.7
4.5
4.5
4.3
4.7
5.1
4.8
4.5
4.9
5.0
4.3
2.9
3.9
3.6
4.0
3.9
3.8
4.0
3.9
4.2
4.4
4.6
4.7
4.9
4.9
4.9
5.1
4.8
5.0
5.1
5.3
5.1
5.3
5.4
5.5
5.6
5.7
5.6
5.3
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.0
5.1
4.9
5.0
5.1
51

18.6
3.9
3.2
5.1
4.5
3.5
3.0
2.2
1.9
((0.2))
(1.9)
(2.6)
(2.0)
(1.4)
(4.0)
(2.0)
0.1
0.2
1.1
1.8
2.0
2.6
3.2
2.4
2.4
1.6
2.8
3.5
3.8
4.1
4.4
3.7
3.3
2.9
2.4
24
2.8
3.2
3.4
3.6
3.6
4.0
3.7
3.4
3.1
3.2
3.1
2.9
3.3
3.9
4.0
3.6
3.4
4.1
4.9
4.8
4.6
4.5
4.7
4.5
4.5
4.3
4.7
5.2
4.8
4.5
4.9
5.0
4.3
2.9
3.9
3.6
4.0
3.9
3.8
4.0
3.9
4.2
4.4
4.6
4.7
4.9
4.9
4.9
5.2
4.9
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.7
5.6
5.3
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.0
5.1
5.0
5.0
5.1
51

(8.9)
(3.7)
1.0
1.2
0.7
0.6
0.0
(0.1)
((2.1))
(3.7)
(4.3)
(3.5)
(2.7)
(5.4)
(3.2)
(1.0)
(0.7)
0.2
1.0
1.3
1.9
2.5
1.7
1.8
1.0
2.2
3.0
3.3
3.6
4.0
3.2
2.8
2.5
1.9
19
2.4
2.8
3.0
3.2
3.3
3.6
3.4
3.1
2.8
2.9
2.8
2.6
3.0
3.7
3.7
3.4
3.2
3.8
4.6
4.5
4.4
4.3
4.5
4.2
4.3
4.1
4.5
5.0
4.6
4.3
4.8
4.8
4.1
2.7
3.7
3.4
3.8
3.8
3.6
3.8
3.8
4.0
4.2
4.5
4.6
4.8
4.8
4.8
5.0
4.7
4.8
5.0
5.2
5.0
5.2
5.2
5.4
5.4
5.6
5.4
5.2
4.9
5.0
5.0
5.1
5.2
5.2
4.7
4.9
5.0
4.8
4.9
5.0
50

1.9
6.3
4.9
3.3
2.6
1.6
1.3
((1.2))
(3.2)
(3.8)
(3.0)
(2.2)
(5.1)
(2.8)
(0.4)
(0.2)
0.8
1.6
1.8
2.4
3.1
2.2
2.3
1.4
2.7
3.5
3.8
4.1
4.5
3.6
3.2
2.9
2.3
23
2.7
3.1
3.4
3.6
3.6
4.0
3.7
3.4
3.1
3.2
3.0
2.8
3.2
3.9
4.0
3.6
3.4
4.1
4.9
4.8
4.7
4.5
4.8
4.5
4.5
4.3
4.7
5.2
4.8
4.6
5.0
5.0
4.3
2.9
3.9
3.6
4.0
3.9
3.8
4.0
3.9
4.2
4.4
4.6
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.1
5.4
5.2
5.3
5.4
5.6
5.6
5.8
5.6
5.4
5.0
5.1
5.2
5.3
5.4
5.3
4.9
5.1
5.1
5.0
5.0
5.1
51

10.9
6.4
3.7
2.8
1.5
1.2
((1.6))
(3.8)
(4.4)
(3.5)
(2.6)
(5.7)
(3.1)
(0.6)
(0.3)
0.7
1.6
1.8
2.5
3.2
2.3
2.3
1.4
2.7
3.5
3.9
4.2
4.6
3.7
3.3
2.9
2.3
23
2.8
3.2
3.4
3.6
3.7
4.0
3.8
3.4
3.1
3.2
3.1
2.9
3.3
4.0
4.0
3.7
3.5
4.2
5.0
4.9
4.7
4.6
4.8
4.5
4.6
4.4
4.8
5.3
4.9
4.6
5.0
5.1
4.3
2.9
3.9
3.7
4.0
4.0
3.8
4.0
4.0
4.2
4.4
4.7
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.2
5.4
5.2
5.4
5.5
5.6
5.7
5.8
5.6
5.4
5.0
5.2
5.2
5.3
5.4
5.3
4.9
5.1
5.1
5.0
5.0
5.2
52

2.1
0.3
0.2
(0.7)
(0.7)
((3.6))
(5.7)
(6.2)
(5.0)
(3.8)
(7.1)
(4.2)
(1.4)
(1.1)
0.1
1.0
1.3
2.0
2.8
1.8
1.9
1.0
2.4
3.2
3.6
3.9
4.3
3.4
3.0
2.7
2.0
20
2.5
3.0
3.2
3.4
3.5
3.8
3.6
3.3
2.9
3.0
2.9
2.7
3.1
3.8
3.9
3.5
3.3
4.0
4.9
4.8
4.6
4.5
4.7
4.4
4.5
4.2
4.7
5.2
4.8
4.5
4.9
5.0
4.2
2.8
3.8
3.6
3.9
3.9
3.7
3.9
3.9
4.1
4.3
4.6
4.7
4.9
4.9
4.9
5.2
4.8
5.0
5.1
5.3
5.2
5.3
5.4
5.5
5.6
5.8
5.6
5.4
5.0
5.1
5.1
5.3
5.3
5.3
4.9
5.0
5.1
4.9
5.0
5.1
51

(1.5)
(0.7)
(1.6)
(1.3)
((4.7))
(6.9)
(7.3)
(5.9)
(4.5)
(7.9)
(4.7)
(1.7)
(1.3)
(0.1)
1.0
1.3
2.0
2.8
1.8
1.9
1.0
2.4
3.3
3.7
4.0
4.4
3.5
3.1
2.7
2.0
20
2.5
3.0
3.3
3.5
3.5
3.9
3.6
3.3
3.0
3.1
2.9
2.7
3.1
3.9
3.9
3.5
3.3
4.1
4.9
4.8
4.7
4.5
4.8
4.5
4.5
4.3
4.7
5.2
4.8
4.6
5.0
5.0
4.2
2.8
3.8
3.6
4.0
3.9
3.8
3.9
3.9
4.1
4.4
4.6
4.8
5.0
5.0
5.0
5.2
4.9
5.0
5.1
5.4
5.2
5.3
5.4
5.6
5.6
5.8
5.6
5.4
5.0
5.1
5.2
5.3
5.4
5.3
4.9
5.1
5.1
5.0
5.0
5.1
51

0.0
(1.7)
(1.3)
((5.5))
(8.0)
(8.3)
(6.5)
(4.8)
(8.6)
(5.1)
(1.7)
(1.3)
0.0
1.2
1.4
2.2
3.1
2.0
2.1
1.1
2.6
3.5
3.9
4.2
4.7
3.7
3.2
2.8
2.1
21
2.7
3.1
3.4
3.6
3.7
4.0
3.8
3.4
3.1
3.2
3.0
2.8
3.2
4.0
4.0
3.6
3.4
4.2
5.1
4.9
4.8
4.6
4.9
4.6
4.6
4.4
4.8
5.3
4.9
4.7
5.1
5.1
4.3
2.8
3.9
3.7
4.0
4.0
3.8
4.0
4.0
4.2
4.5
4.7
4.8
5.1
5.1
5.0
5.3
5.0
5.1
5.2
5.5
5.3
5.4
5.5
5.7
5.7
5.9
5.7
5.5
5.1
5.2
5.2
5.4
5.4
5.4
5.0
5.1
5.2
5.0
5.1
5.2
52

(3.4)
(2.0)
(0.5)
((7.3))
((9.1)) ((17.0))
(9.9) (11.9) (17.2) (17.3)
(9.8) (11.4) (14.7) (13.5)
(7.5)
(8.3) (10.2)
(7.7)
(5.5)
(5.9)
(6.9)
(4.2)
(9.7) (10.5) (12.1) (11.1)
(5.6)
(5.9)
(6.6)
(4.8)
(1.9)
(1.7)
(1.8)
0.5
(1.4)
(1.3)
(1.3)
0.8
0.0
0.3
0.4
2.6
1.2
1.6
1.8
3.9
1.5
1.9
2.1
4.1
2.4
2.8
3.1
4.9
3.2
3.7
4.0
5.8
2.1
2.5
2.7
4.3
2.2
2.5
2.7
4.2
1.1
1.4
1.5
2.8
2.7
3.1
3.3
4.6
3.7
4.0
4.3
5.6
4.1
4.5
4.7
6.0
4.4
4.8
5.0
6.3
4.9
5.2
5.5
6.7
3.8
4.2
4.4
5.5
3.4
3.6
3.8
4.8
2.9
3.2
3.3
4.3
2.2
22
2.4
24
2.5
25
3.4
34
2.8
3.0
3.1
4.0
3.2
3.5
3.6
4.5
3.5
3.8
3.9
4.7
3.8
4.0
4.1
5.0
3.8
4.0
4.2
5.0
4.2
4.4
4.6
5.3
3.9
4.1
4.2
5.0
3.5
3.7
3.8
4.6
3.2
3.3
3.5
4.1
3.3
3.5
3.6
4.2
3.1
3.3
3.4
4.0
2.9
3.0
3.1
3.7
3.3
3.5
3.6
4.2
4.1
4.3
4.4
5.0
4.1
4.3
4.4
5.0
3.7
3.9
4.0
4.6
3.5
3.7
3.8
4.3
4.3
4.5
4.6
5.1
5.2
5.4
5.5
6.1
5.1
5.2
5.4
5.9
4.9
5.1
5.2
5.7
4.7
4.9
5.0
5.6
5.0
5.2
5.3
5.8
4.7
4.8
5.0
5.5
4.7
4.9
5.0
5.5
4.5
4.6
4.7
5.2
4.9
5.1
5.2
5.7
5.4
5.6
5.7
6.2
5.0
5.2
5.3
5.8
4.7
4.9
5.0
5.4
5.2
5.3
5.4
5.9
5.2
5.4
5.5
5.9
4.4
4.5
4.6
5.0
2.9
3.0
3.0
3.4
4.0
4.1
4.2
4.6
3.7
3.8
3.9
4.3
4.1
4.2
4.3
4.7
4.0
4.2
4.2
4.6
3.9
4.0
4.1
4.5
4.1
4.2
4.3
4.6
4.0
4.2
4.2
4.6
4.3
4.4
4.5
4.8
4.5
4.6
4.7
5.1
4.8
4.9
5.0
5.3
4.9
5.0
5.1
5.5
5.1
5.2
5.3
5.7
5.1
5.2
5.3
5.7
5.1
5.2
5.3
5.7
5.4
5.5
5.6
5.9
5.0
5.1
5.2
5.6
5.2
5.3
5.4
5.7
5.3
5.4
5.5
5.8
5.5
5.6
5.7
6.0
5.3
5.5
5.5
5.8
5.5
5.6
5.7
6.0
5.6
5.7
5.8
6.1
5.7
5.8
5.9
6.2
5.8
5.9
6.0
6.3
6.0
6.1
6.2
6.5
5.8
5.9
6.0
6.3
5.5
5.6
5.7
6.0
5.1
5.2
5.3
5.6
5.3
5.4
5.4
5.7
5.3
5.4
5.5
5.8
5.4
5.5
5.6
5.9
5.5
5.6
5.7
6.0
5.5
5.6
5.6
5.9
5.0
5.1
5.2
5.4
5.2
5.3
5.4
5.6
5.2
5.3
5.4
5.7
5.1
5.2
5.2
5.5
5.1
5.2
5.3
5.5
5.2
52
5.3
53
5.4
54
5.7
57

(9.6)
(2.6)
0.7
(9.4)
(2.1)
3.9
3.7
5.4
6.6
6.5
7.2
8.0
6.1
5.9
4.3
6.1
7.2
7.5
7.7
8.1
6.7
6.0
5.3
4.4
44
4.9
5.4
5.7
5.9
5.8
6.2
5.8
5.3
4.9
4.9
4.7
4.4
4.8
5.7
5.7
5.2
4.9
5.7
6.7
6.5
6.3
6.1
6.4
6.0
6.0
5.7
6.2
6.7
6.3
5.9
6.4
6.4
5.5
3.8
5.0
4.7
5.1
5.0
4.8
5.0
5.0
5.2
5.4
5.7
5.8
6.1
6.0
6.0
6.3
5.9
6.0
6.2
6.4
6.2
6.3
6.4
6.6
6.6
6.8
6.6
6.3
5.9
6.0
6.1
6.2
6.2
6.2
5.7
5.9
5.9
5.8
5.8
5.9
59

5.0
6.2
7.4
(9.4) (15.8)
(0.1)
(1.7)
6.8
7.2
6.1
6.3
7.7
8.1
8.8
9.4
8.5
8.9
9.1
9.5
9.8
10.3
7.6
7.8
7.2
7.4
5.4
5.4
7.3
7.4
8.3
8.5
8.6
8.8
8.7
9.0
9.1
9.3
7.6
7.7
6.8
6.9
6.1
6.1
5.0
50
5.0
50
5.6
5.6
6.1
6.1
6.3
6.3
6.5
6.5
6.4
6.5
6.8
6.8
6.4
6.4
5.8
5.9
5.3
5.4
5.4
5.4
5.1
5.2
4.8
4.8
5.3
5.3
6.1
6.2
6.1
6.1
5.6
5.6
5.3
5.3
6.1
6.2
7.1
7.2
6.9
7.0
6.7
6.7
6.5
6.5
6.7
6.8
6.4
6.4
6.4
6.4
6.1
6.1
6.5
6.5
7.1
7.1
6.6
6.6
6.2
6.3
6.7
6.7
6.7
6.8
5.8
5.8
4.1
4.1
5.2
5.3
4.9
4.9
5.4
5.4
5.3
5.3
5.1
5.1
5.3
5.3
5.2
5.2
5.5
5.5
5.7
5.7
6.0
6.0
6.1
6.1
6.3
6.3
6.3
6.3
6.3
6.3
6.5
6.5
6.1
6.1
6.3
6.3
6.4
6.4
6.6
6.6
6.4
6.4
6.6
6.6
6.6
6.7
6.8
6.8
6.8
6.9
7.0
7.0
6.8
6.8
6.5
6.6
6.1
6.1
6.2
6.2
6.2
6.3
6.4
6.4
6.4
6.5
6.4
6.4
5.9
5.9
6.1
6.1
6.1
6.1
6.0
6.0
6.0
6.0
6.1
61
6.1
61

1899

1900

1901

1902

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

1916

1917

1919

1920

1921

1922

1923

INVESTMENT FROM END YEAR


1924

1925

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

INVESTMENT FROM END YEAR


1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

INVESTMENT FROM END YEAR


1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

HOW TO USE TABLES OF TOTAL RETURNS


The dates along the top (and bottom) are those on which each portfolio starts;
those down the side are the dates to which the annual rate of return is calculated.
Thus the figure at the bottom right hand corner - 17.4 - shows that the real
return on a portfolio bought at the end of December 2012 and held for one year
to December 2013 was 17.4%. Figures in brackets indicate negative returns.

1913

1914

1915

1918

Each figure on the bottom line of the table shows the average annual return up to
the end of December 2013 from the year shown below the figure. The first figure
is 5.1, showing that the average annual rate of return over the whole period since
1899 has been 5.1%.

(34.0)
(6.0)
7.2
6.1
8.3
9.7
9.1
9.8
10.6
7.8
7.4
5.2
7.5
8.6
8.9
9.1
9.5
7.7
6.8
6.1
4.9
49
5.5
6.1
6.3
6.5
6.4
6.8
6.4
5.8
5.3
5.4
5.1
4.7
5.2
6.1
6.1
5.6
5.3
6.1
7.2
7.0
6.7
6.5
6.8
6.4
6.4
6.1
6.5
7.1
6.6
6.2
6.7
6.7
5.8
4.0
5.2
4.9
5.3
5.2
5.1
5.3
5.2
5.4
5.7
6.0
6.1
6.3
6.3
6.3
6.5
6.1
6.3
6.4
6.6
6.4
6.6
6.7
6.8
6.9
7.0
6.8
6.5
6.1
6.2
6.3
6.4
6.4
6.4
5.9
6.1
6.1
6.0
6.0
6.1
61

34.0
36.6
24.3
22.6
21.5
18.7
18.1
18.0
13.9
12.8
9.8
11.9
12.8
12.9
12.8
13.0
10.9
9.7
8.7
7.4
74
7.9
8.4
8.5
8.6
8.5
8.8
8.3
7.6
7.0
7.0
6.7
6.3
6.7
7.6
7.6
7.0
6.6
7.5
8.5
8.3
8.0
7.7
8.0
7.5
7.5
7.2
7.6
8.2
7.6
7.2
7.7
7.7
6.7
4.9
6.1
5.8
6.2
6.1
5.9
6.1
6.0
6.2
6.5
6.7
6.9
7.1
7.0
7.0
7.3
6.9
7.0
7.1
7.3
7.1
7.3
7.3
7.5
7.5
7.7
7.5
7.2
6.7
6.8
6.9
7.0
7.0
7.0
6.4
6.6
6.7
6.5
6.5
6.6
66

39.3
19.7
19.0
18.6
15.8
15.6
15.9
11.6
10.6
7.6
10.1
11.2
11.4
11.4
11.7
9.6
8.5
7.5
6.1
61
6.8
7.3
7.5
7.7
7.5
7.9
7.4
6.8
6.1
6.2
5.9
5.5
6.0
6.9
6.9
6.3
5.9
6.8
7.9
7.7
7.4
7.2
7.4
7.0
7.0
6.6
7.1
7.7
7.2
6.8
7.3
7.3
6.2
4.4
5.7
5.3
5.8
5.7
5.5
5.7
5.6
5.8
6.1
6.4
6.5
6.7
6.7
6.6
6.9
6.5
6.6
6.8
7.0
6.8
6.9
7.0
7.2
7.2
7.4
7.2
6.9
6.4
6.5
6.6
6.7
6.8
6.7
6.2
6.4
6.4
6.2
6.3
6.4
64

2.8
10.0
12.4
10.6
11.4
12.4
8.1
7.5
4.6
7.5
9.0
9.3
9.5
9.9
7.8
6.8
5.9
4.6
46
5.3
5.9
6.2
6.4
6.3
6.8
6.3
5.7
5.1
5.2
4.9
4.5
5.0
6.0
6.0
5.4
5.1
6.1
7.1
7.0
6.7
6.5
6.7
6.3
6.3
6.0
6.5
7.1
6.6
6.2
6.7
6.7
5.7
3.8
5.1
4.8
5.2
5.1
5.0
5.2
5.1
5.3
5.6
5.9
6.0
6.3
6.2
6.2
6.5
6.1
6.2
6.4
6.6
6.4
6.5
6.6
6.8
6.8
7.0
6.8
6.5
6.1
6.2
6.2
6.4
6.4
6.4
5.8
6.0
6.1
5.9
5.9
6.1
61

17.6
17.4
13.3
13.7
14.4
9.0
8.2
4.8
8.1
9.6
9.9
10.1
10.5
8.2
7.0
6.0
4.7
47
5.4
6.1
6.4
6.6
6.5
6.9
6.4
5.8
5.2
5.3
4.9
4.5
5.1
6.2
6.1
5.5
5.2
6.2
7.3
7.1
6.8
6.6
6.8
6.4
6.4
6.0
6.6
7.2
6.6
6.2
6.8
6.8
5.7
3.8
5.1
4.8
5.3
5.2
5.0
5.2
5.1
5.4
5.6
6.0
6.1
6.3
6.3
6.3
6.5
6.1
6.3
6.4
6.7
6.4
6.6
6.7
6.8
6.9
7.1
6.9
6.6
6.1
6.2
6.3
6.4
6.5
6.4
5.9
6.1
6.1
5.9
6.0
6.1
61

17.3
11.2
12.4
13.6
7.4
6.7
3.1
6.9
8.8
9.2
9.4
9.9
7.5
6.3
5.3
3.9
39
4.7
5.4
5.8
6.1
6.0
6.5
5.9
5.3
4.7
4.8
4.5
4.1
4.7
5.8
5.8
5.2
4.8
5.8
7.0
6.8
6.5
6.3
6.6
6.1
6.1
5.8
6.3
7.0
6.4
6.0
6.5
6.6
5.5
3.6
4.9
4.6
5.1
5.0
4.8
5.0
4.9
5.2
5.5
5.8
5.9
6.1
6.1
6.1
6.4
6.0
6.1
6.3
6.5
6.3
6.5
6.5
6.7
6.8
6.9
6.7
6.4
6.0
6.1
6.1
6.3
6.3
6.3
5.7
6.0
6.0
5.8
5.8
6.0
60

5.5
10.0
12.4
5.1
4.7
0.9
5.5
7.8
8.3
8.7
9.3
6.7
5.5
4.5
3.1
31
4.0
4.8
5.2
5.5
5.5
6.0
5.5
4.8
4.2
4.3
4.0
3.6
4.3
5.4
5.4
4.8
4.5
5.5
6.7
6.5
6.2
6.0
6.3
5.8
5.9
5.5
6.1
6.8
6.2
5.8
6.3
6.4
5.3
3.3
4.7
4.4
4.8
4.7
4.6
4.8
4.7
5.0
5.3
5.6
5.7
6.0
6.0
5.9
6.2
5.8
5.9
6.1
6.4
6.1
6.3
6.4
6.6
6.6
6.8
6.6
6.3
5.8
6.0
6.0
6.1
6.2
6.1
5.6
5.8
5.9
5.7
5.7
5.9
59

14.8
16.0
4.9
4.5
(0.0)
5.5
8.1
8.7
9.0
9.7
6.8
5.5
4.4
2.9
29
3.9
4.7
5.2
5.5
5.5
6.0
5.5
4.8
4.2
4.3
4.0
3.6
4.2
5.4
5.4
4.8
4.4
5.5
6.7
6.5
6.3
6.0
6.3
5.9
5.9
5.5
6.1
6.8
6.2
5.8
6.3
6.4
5.3
3.3
4.7
4.3
4.8
4.7
4.5
4.8
4.7
5.0
5.3
5.6
5.7
6.0
6.0
5.9
6.2
5.8
6.0
6.1
6.4
6.1
6.3
6.4
6.6
6.6
6.8
6.6
6.3
5.8
6.0
6.0
6.2
6.2
6.2
5.6
5.8
5.9
5.7
5.7
5.9
59

17.3
0.3 (14.1)
1.3
(5.9)
(3.4)
(9.5)
3.8
0.7
7.0
5.1
7.8
6.4
8.3
7.1
9.1
8.2
6.1
4.9
4.7
3.6
3.6
2.5
2.0
20
0.8
08
3.2
2.2
4.1
3.2
4.6
3.8
5.0
4.3
5.0
4.3
5.6
5.0
5.0
4.4
4.3
3.7
3.7
3.1
3.9
3.3
3.6
3.0
3.1
2.6
3.8
3.3
5.1
4.6
5.1
4.6
4.4
4.0
4.1
3.7
5.2
4.8
6.5
6.2
6.3
6.0
6.0
5.7
5.8
5.5
6.1
5.8
5.6
5.3
5.7
5.4
5.3
5.0
5.9
5.6
6.6
6.3
6.0
5.7
5.6
5.3
6.2
5.9
6.2
6.0
5.1
4.8
3.0
2.8
4.5
4.2
4.1
3.9
4.6
4.4
4.5
4.3
4.4
4.1
4.6
4.3
4.5
4.3
4.8
4.6
5.1
4.9
5.4
5.2
5.6
5.4
5.8
5.7
5.8
5.6
5.8
5.6
6.1
5.9
5.7
5.5
5.8
5.7
6.0
5.8
6.3
6.1
6.0
5.9
6.2
6.0
6.3
6.1
6.5
6.3
6.5
6.4
6.7
6.6
6.5
6.4
6.2
6.0
5.7
5.6
5.9
5.7
5.9
5.7
6.0
5.9
6.1
6.0
6.0
5.9
5.5
5.4
5.7
5.6
5.8
5.6
5.6
5.5
5.6
5.5
5.8
58
5.6
56

3.1
(7.0) (16.2)
6.1
7.7
10.5
13.1
11.0
13.1
11.1
12.8
11.8
13.3
7.6
8.2
5.7
6.1
4.3
4.4
2.3
23
2.3
23
3.6
3.7
4.7
4.8
5.2
5.4
5.6
5.8
5.6
5.7
6.2
6.4
5.5
5.7
4.8
4.9
4.0
4.1
4.2
4.2
3.9
3.9
3.4
3.4
4.1
4.2
5.5
5.6
5.4
5.5
4.8
4.8
4.4
4.4
5.6
5.7
6.9
7.1
6.7
6.8
6.4
6.5
6.1
6.2
6.4
6.5
5.9
6.0
6.0
6.0
5.6
5.6
6.2
6.3
6.9
7.0
6.3
6.4
5.8
5.9
6.4
6.5
6.5
6.6
5.3
5.3
3.2
3.2
4.7
4.7
4.3
4.3
4.8
4.8
4.7
4.7
4.5
4.5
4.7
4.8
4.7
4.7
5.0
5.0
5.3
5.3
5.6
5.7
5.8
5.8
6.0
6.1
6.0
6.1
6.0
6.0
6.3
6.3
5.9
5.9
6.0
6.1
6.2
6.2
6.4
6.5
6.2
6.2
6.4
6.4
6.5
6.5
6.7
6.7
6.7
6.8
6.9
7.0
6.7
6.7
6.4
6.4
5.9
5.9
6.0
6.0
6.0
6.1
6.2
6.2
6.3
6.3
6.2
6.2
5.6
5.7
5.9
5.9
5.9
5.9
5.7
5.8
5.8
5.8
5.9
59
5.9
59

1919

1920

1921

1922

1923

1924

1925

1926

1927

1929

INVESTMENT FROM END YEAR

1928

1930

The top figure in each column is the rate of return in the first year, so that reading
diagonally down the table gives the real rate of return in each year since 1899.
The table can be used to see the rate of return over any period; thus a purchase
made at the end of 1900 would have lost 3.5% of its value in one year (allowing
for reinvestment of income) but, over the first five years (up to the end of 1905),
would have given an average annual real return of 3.5%.
38.3
31.3
24.9
21.5
20.3
12.9
9.7
7.3
4.5
45
5.9
7.0
7.4
7.7
7.5
8.1
7.2
6.3
5.3
5.5
5.0
4.4
5.2
6.6
6.6
5.8
5.3
6.6
8.0
7.7
7.3
7.0
7.3
6.8
6.8
6.3
7.0
7.7
7.0
6.5
7.2
7.2
5.9
3.7
5.2
4.8
5.4
5.2
5.0
5.3
5.2
5.5
5.8
6.1
6.3
6.5
6.5
6.5
6.8
6.3
6.5
6.6
6.9
6.6
6.8
6.9
7.1
7.1
7.4
7.1
6.8
6.2
6.4
6.4
6.6
6.6
6.6
6.0
6.2
6.2
6.1
6.1
6.2
62

24.8
18.7
16.3
16.2
8.4
5.5
3.5
0.9
09
2.8
4.3
5.0
5.5
5.4
6.2
5.4
4.5
3.7
3.9
3.5
3.0
3.9
5.4
5.4
4.6
4.2
5.5
7.0
6.7
6.4
6.1
6.5
5.9
5.9
5.5
6.2
7.0
6.3
5.8
6.5
6.5
5.2
3.0
4.5
4.2
4.7
4.6
4.4
4.7
4.6
4.9
5.2
5.6
5.7
6.0
6.0
6.0
6.3
5.8
6.0
6.2
6.5
6.2
6.4
6.5
6.7
6.7
6.9
6.7
6.4
5.8
6.0
6.0
6.2
6.3
6.2
5.6
5.9
5.9
5.7
5.7
5.9
59

13.0
12.3
13.5
4.7
2.1
0.3
(2 1)
(2.1)
0.4
2.2
3.2
3.9
4.0
4.9
4.2
3.3
2.5
2.8
2.4
2.0
2.9
4.5
4.6
3.8
3.4
4.8
6.4
6.1
5.8
5.5
5.9
5.4
5.4
5.0
5.7
6.5
5.8
5.3
6.0
6.1
4.8
2.5
4.1
3.7
4.3
4.2
4.0
4.3
4.2
4.5
4.9
5.2
5.4
5.7
5.7
5.7
6.0
5.5
5.7
5.9
6.2
5.9
6.1
6.2
6.4
6.5
6.7
6.5
6.1
5.6
5.8
5.8
6.0
6.0
6.0
5.4
5.6
5.7
5.5
5.5
5.7
57

11.6
13.7
2.1
(0.5)
(2.0)
(4 4)
(4.4)
(1.3)
1.0
2.1
3.0
3.2
4.3
3.5
2.6
1.8
2.2
1.8
1.4
2.4
4.1
4.2
3.4
3.0
4.5
6.1
5.9
5.6
5.3
5.7
5.1
5.2
4.7
5.5
6.3
5.6
5.1
5.8
5.9
4.6
2.2
3.9
3.5
4.1
4.0
3.8
4.1
4.0
4.4
4.7
5.1
5.3
5.6
5.6
5.5
5.9
5.4
5.6
5.8
6.1
5.8
6.0
6.1
6.3
6.4
6.6
6.4
6.0
5.5
5.6
5.7
5.9
5.9
5.9
5.3
5.5
5.6
5.4
5.4
5.6
56

15.9
(2.4) (17.7)
(4.2) (13.0)
(7.9)
(5.2) (11.3)
(7.9)
(7.9)
(7 3) (12.3)
(7.3)
(12 3) (10
(10.4)
4) (11
(11.7)
7) (15.3)
(15 3)
(3.3)
(6.8)
(3.8)
(2.4)
0.5
(0.5)
(3.0)
0.3
2.4
6.1
1.0
(1.0)
2.2
4.3
7.6
2.1
0.5
3.4
5.4
8.3
2.4
1.0
3.6
5.3
7.7
3.6
2.5
5.0
6.8
9.0
2.9
1.8
4.0
5.4
7.1
2.0
0.9
2.8
3.9
5.3
1.1
0.1
1.7
2.7
3.8
1.6
0.6
2.2
3.1
4.1
1.3
0.3
1.8
2.6
3.5
0.8
(0.1)
1.2
1.9
2.7
1.9
1.2
2.5
3.2
4.0
3.8
3.1
4.5
5.3
6.3
3.8
3.2
4.5
5.3
6.2
3.0
2.4
3.6
4.3
5.0
2.6
2.0
3.1
3.7
4.4
4.2
3.7
4.8
5.5
6.2
5.9
5.5
6.7
7.4
8.3
5.7
5.2
6.4
7.1
7.9
5.3
4.9
6.0
6.6
7.4
5.0
4.6
5.7
6.3
6.9
5.5
5.1
6.1
6.7
7.3
4.9
4.5
5.5
6.0
6.6
5.0
4.6
5.5
6.0
6.6
4.5
4.2
5.0
5.5
6.0
5.3
4.9
5.8
6.3
6.9
6.2
5.9
6.8
7.3
7.9
5.5
5.2
6.0
6.4
7.0
5.0
4.7
5.4
5.9
6.3
5.7
5.4
6.2
6.6
7.1
5.8
5.5
6.2
6.7
7.2
4.4
4.1
4.8
5.2
5.6
2.0
1.6
2.2
2.5
2.8
3.7
3.4
4.0
4.4
4.8
3.3
3.0
3.6
4.0
4.3
3.9
3.7
4.3
4.6
5.0
3.9
3.6
4.2
4.5
4.8
3.6
3.4
3.9
4.2
4.6
3.9
3.7
4.2
4.5
4.9
3.9
3.6
4.2
4.5
4.8
4.2
4.0
4.5
4.8
5.1
4.6
4.3
4.9
5.2
5.5
5.0
4.8
5.3
5.6
5.9
5.1
4.9
5.5
5.8
6.1
5.5
5.3
5.8
6.1
6.4
5.4
5.2
5.8
6.1
6.4
5.4
5.2
5.7
6.0
6.3
5.8
5.6
6.1
6.4
6.7
5.3
5.1
5.6
5.9
6.2
5.5
5.3
5.8
6.1
6.3
5.7
5.5
6.0
6.2
6.5
6.0
5.8
6.3
6.6
6.8
5.7
5.5
6.0
6.3
6.5
5.9
5.8
6.2
6.5
6.8
6.0
5.9
6.3
6.6
6.9
6.2
6.1
6.5
6.8
7.1
6.3
6.2
6.6
6.9
7.1
6.5
6.4
6.8
7.1
7.4
6.3
6.1
6.6
6.8
7.1
5.9
5.8
6.2
6.4
6.7
5.4
5.3
5.7
5.9
6.1
5.6
5.4
5.8
6.0
6.3
5.6
5.5
5.9
6.1
6.3
5.8
5.6
6.0
6.3
6.5
5.9
5.7
6.1
6.3
6.6
5.8
5.7
6.0
6.3
6.5
5.2
5.1
5.4
5.6
5.8
5.4
5.3
5.7
5.9
6.1
5.5
5.4
5.7
5.9
6.1
5.3
5.2
5.5
5.7
5.9
5.4
5.2
5.6
5.8
6.0
5.5
55
5.4
54
5.7
57
5.9
59
6.1
61

1931

1932

1933

1934

1935

1936

1937

1938

1939

19.2
18.8
16.5
15.2
13.0
13.7
10.8
8.2
6.2
6.3
5.4
4.4
5.7
8.0
7.8
6.5
5.7
7.6
9.7
9.2
8.6
8.1
8.5
7.6
7.6
7.0
7.8
8.8
7.8
7.2
7.9
7.9
6.3
3.4
5.4
4.9
5.6
5.4
5.1
5.4
5.3
5.7
6.0
6.5
6.6
6.9
6.9
6.8
7.2
6.6
6.8
7.0
7.3
7.0
7.2
7.3
7.5
7.6
7.8
7.5
7.1
6.5
6.7
6.7
6.9
6.9
6.8
6.2
6.4
6.5
6.3
6.3
6.4
64

18.4
15.2
13.9
11.6
12.7
9.5
6.7
4.6
4.9
4.1
3.1
4.7
7.2
7.0
5.7
4.9
6.9
9.2
8.7
8.1
7.6
8.0
7.2
7.1
6.5
7.4
8.4
7.4
6.8
7.6
7.6
5.9
3.0
5.0
4.5
5.2
5.1
4.8
5.1
5.0
5.4
5.8
6.2
6.3
6.7
6.6
6.6
7.0
6.4
6.6
6.8
7.1
6.8
7.0
7.1
7.3
7.4
7.6
7.3
6.9
6.3
6.5
6.5
6.7
6.8
6.7
6.0
6.3
6.3
6.1
6.1
6.3
63

12.1
11.7
9.4
11.3
7.8
4.9
2.8
3.4
2.6
1.7
3.5
6.3
6.2
4.8
4.1
6.3
8.6
8.1
7.6
7.0
7.5
6.7
6.7
6.0
6.9
8.1
7.1
6.4
7.2
7.3
5.5
2.5
4.6
4.1
4.9
4.7
4.4
4.8
4.7
5.1
5.5
5.9
6.1
6.4
6.4
6.4
6.7
6.2
6.4
6.6
6.9
6.6
6.8
6.9
7.1
7.2
7.4
7.1
6.7
6.1
6.3
6.3
6.5
6.6
6.5
5.8
6.1
6.1
5.9
6.0
6.1
61

11.3
8.0
11.0
6.7
3.5
1.3
2.2
1.5
0.6
2.7
5.8
5.7
4.3
3.5
5.9
8.4
7.9
7.3
6.8
7.3
6.4
6.4
5.8
6.7
7.9
6.9
6.2
7.1
7.1
5.3
2.2
4.4
3.9
4.6
4.5
4.2
4.6
4.5
4.9
5.3
5.8
5.9
6.3
6.3
6.2
6.6
6.0
6.2
6.4
6.8
6.5
6.7
6.8
7.0
7.1
7.3
7.0
6.6
6.0
6.2
6.2
6.4
6.5
6.4
5.7
6.0
6.0
5.8
5.9
6.0
60

4.8
10.9
5.2
1.7
(0.6)
0.7
0.2
(0.6)
1.7
5.3
5.2
3.7
3.0
5.5
8.2
7.7
7.1
6.5
7.1
6.2
6.2
5.5
6.5
7.8
6.7
6.0
6.9
7.0
5.1
2.0
4.2
3.7
4.4
4.3
4.0
4.4
4.3
4.7
5.2
5.6
5.8
6.2
6.2
6.1
6.5
5.9
6.1
6.3
6.7
6.4
6.6
6.7
6.9
7.0
7.3
7.0
6.6
5.9
6.1
6.1
6.3
6.4
6.3
5.6
5.9
6.0
5.7
5.8
5.9
59

17.3
5.4
0.6
(1.9)
(0.1)
(0.6)
(1.4)
1.4
5.3
5.3
3.6
2.8
5.6
8.5
7.9
7.2
6.6
7.2
6.3
6.3
5.6
6.6
7.9
6.8
6.0
7.0
7.0
5.1
1.9
4.2
3.6
4.4
4.3
4.0
4.4
4.3
4.7
5.2
5.6
5.8
6.2
6.2
6.1
6.6
6.0
6.2
6.4
6.7
6.4
6.6
6.8
7.0
7.1
7.3
7.0
6.6
5.9
6.1
6.2
6.4
6.5
6.4
5.6
5.9
6.0
5.8
5.8
6.0
60

(5.3)
(6.8)
(7.5)
(4.0)
(3.8)
(4.2)
(0.7)
3.9
4.0
2.3
1.6
4.6
7.8
7.3
6.6
6.0
6.7
5.7
5.7
5.0
6.1
7.5
6.3
5.6
6.6
6.7
4.7
1.3
3.7
3.2
4.0
3.9
3.6
4.0
3.9
4.4
4.9
5.4
5.6
6.0
5.9
5.9
6.3
5.7
5.9
6.1
6.5
6.2
6.4
6.6
6.8
6.9
7.1
6.8
6.4
5.8
5.9
6.0
6.2
6.3
6.2
5.5
5.8
5.8
5.6
5.6
5.8
58

(8.3)
(8.6)
(3.5)
(3.4)
(4.0)
0.1
5.3
5.2
3.2
2.3
5.6
9.0
8.3
7.5
6.8
7.5
6.4
6.4
5.6
6.7
8.1
6.9
6.1
7.1
7.2
5.1
1.6
4.1
3.5
4.4
4.2
3.9
4.3
4.2
4.7
5.1
5.7
5.9
6.3
6.2
6.2
6.6
6.0
6.2
6.4
6.8
6.4
6.7
6.8
7.1
7.1
7.4
7.1
6.6
6.0
6.2
6.2
6.4
6.5
6.4
5.7
6.0
6.0
5.8
5.8
6.0
60

(8.9)
(1.1)
(1.8)
(2.9)
1.8
7.7
7.3
4.7
3.5
7.1
10.7
9.8
8.8
8.0
8.6
7.3
7.3
6.4
7.6
9.0
7.7
6.8
7.9
7.9
5.7
2.0
4.6
4.0
4.8
4.7
4.4
4.7
4.6
5.1
5.6
6.1
6.3
6.7
6.6
6.6
7.0
6.3
6.6
6.8
7.2
6.8
7.0
7.2
7.4
7.5
7.7
7.4
6.9
6.2
6.4
6.5
6.7
6.8
6.7
5.9
6.2
6.2
6.0
6.1
6.2
62

7.4
2.0
(0.8)
4.7
11.4
10.3
6.8
5.2
9.0
12.9
11.7
10.4
9.4
10.0
8.5
8.4
7.4
8.6
10.1
8.6
7.6
8.7
8.7
6.4
2.5
5.1
4.5
5.4
5.2
4.8
5.2
5.1
5.6
6.0
6.5
6.7
7.1
7.1
7.0
7.4
6.8
7.0
7.2
7.6
7.2
7.4
7.5
7.8
7.8
8.1
7.7
7.3
6.6
6.7
6.8
7.0
7.1
7.0
6.2
6.5
6.5
6.3
6.3
6.5
65

(3.1)
(4.6)
3.8
12.4
10.9
6.7
4.9
9.2
13.6
12.1
10.7
9.6
10.2
8.6
8.5
7.4
8.7
10.2
8.6
7.6
8.7
8.7
6.3
2.3
5.0
4.4
5.3
5.1
4.7
5.1
5.0
5.5
6.0
6.5
6.7
7.1
7.1
7.0
7.4
6.7
6.9
7.2
7.6
7.2
7.4
7.5
7.8
7.8
8.1
7.7
7.3
6.5
6.7
6.8
7.0
7.1
6.9
6.2
6.5
6.5
6.3
6.3
6.5
65

(6.1)
7.4
18.2
14.7
8.8
6.3
11.1
15.8
14.0
12.2
10.8
11.3
9.6
9.3
8.1
9.5
11.0
9.3
8.2
9.4
9.3
6.8
2.5
5.4
4.7
5.6
5.4
5.0
5.4
5.3
5.8
6.3
6.8
7.0
7.4
7.4
7.3
7.7
7.0
7.2
7.4
7.8
7.4
7.7
7.8
8.0
8.1
8.3
8.0
7.5
6.7
6.9
7.0
7.2
7.2
7.1
6.3
6.6
6.7
6.4
6.5
6.6
66

22.9
32.6
22.6
12.9
9.0
14.3
19.4
16.7
14.4
12.6
13.1
11.0
10.6
9.2
10.6
12.2
10.3
9.0
10.3
10.1
7.4
2.9
5.9
5.2
6.1
5.9
5.5
5.9
5.7
6.2
6.7
7.2
7.4
7.9
7.8
7.7
8.1
7.4
7.6
7.8
8.2
7.8
8.0
8.1
8.4
8.4
8.7
8.3
7.8
7.0
7.2
7.2
7.4
7.5
7.4
6.6
6.9
6.9
6.6
6.7
6.8
68

42.9
22.4
9.8
5.7
12.6
18.8
15.9
13.4
11.6
12.1
10.0
9.7
8.3
9.7
11.5
9.6
8.3
9.6
9.5
6.7
2.0
5.2
4.4
5.5
5.3
4.9
5.3
5.1
5.7
6.2
6.8
7.0
7.4
7.4
7.3
7.7
7.0
7.2
7.4
7.8
7.4
7.7
7.8
8.0
8.1
8.4
8.0
7.5
6.7
6.9
6.9
7.2
7.2
7.1
6.3
6.6
6.6
6.4
6.4
6.6
66

1940

1941

1942

1943

1944

1945

1946

1947

1948

1949

1950

1951

1952

1953

INVESTMENT FROM END YEAR

4.8
(3.8) (11.7)
(4.4)
(8.7)
6.1
6.6
14.5
17.0
11.9
13.4
9.7
10.6
8.1
8.6
9.2
9.7
7.1
7.4
7.1
7.3
5.8
5.9
7.5
7.8
9.6
9.9
7.7
7.9
6.4
6.5
7.9
8.1
7.9
8.1
5.1
5.1
0.3
0.1
3.7
3.6
3.0
2.9
4.1
4.1
3.9
3.9
3.6
3.5
4.1
4.0
4.0
3.9
4.5
4.5
5.1
5.1
5.7
5.8
6.0
6.0
6.5
6.5
6.4
6.5
6.4
6.4
6.9
6.9
6.1
6.2
6.4
6.4
6.6
6.7
7.1
7.1
6.6
6.7
6.9
7.0
7.1
7.1
7.3
7.4
7.4
7.5
7.7
7.8
7.3
7.4
6.8
6.9
6.1
6.1
6.3
6.3
6.3
6.4
6.6
6.6
6.6
6.7
6.5
6.6
5.7
5.7
6.0
6.1
6.1
6.1
5.8
5.8
5.9
5.9
6.1
61
6.1
61

(5.5)
17.1
28.6
20.7
15.7
12.5
13.2
10.0
9.6
7.8
9.7
12.0
9.5
8.0
9.6
9.5
6.2
0.8
4.5
3.7
4.9
4.7
4.2
4.7
4.6
5.2
5.8
6.5
6.7
7.2
7.1
7.0
7.6
6.7
7.0
7.2
7.7
7.2
7.5
7.7
7.9
8.0
8.3
7.9
7.3
6.5
6.7
6.8
7.0
7.1
7.0
6.1
6.4
6.5
6.2
6.2
6.4
64

45.2
49.9
31.0
21.6
16.4
16.6
12.4
11.7
9.4
11.4
13.7
10.9
9.1
10.7
10.5
6.9
1.2
5.1
4.2
5.4
5.2
4.7
5.2
5.0
5.7
6.3
6.9
7.2
7.7
7.6
7.5
8.0
7.1
7.4
7.6
8.1
7.6
7.9
8.0
8.3
8.3
8.6
8.2
7.6
6.8
7.0
7.0
7.3
7.4
7.2
6.3
6.7
6.7
6.4
6.5
6.7
67

54.8
24.4
14.7
10.2
11.6
7.8
7.6
5.6
8.2
11.0
8.2
6.5
8.4
8.4
4.8
(1.1)
3.1
2.3
3.7
3.5
3.1
3.7
3.6
4.3
4.9
5.7
6.0
6.5
6.5
6.4
7.0
6.1
6.4
6.7
7.2
6.7
7.0
7.2
7.5
7.5
7.9
7.4
6.9
6.1
6.3
6.3
6.6
6.7
6.6
5.7
6.0
6.1
5.8
5.9
6.1
61

(0.1)
(1.3)
(1.6)
2.9
0.2
1.3
(0.0)
3.4
6.9
4.4
3.0
5.3
5.5
1.9
(4.0)
0.5
(0.2)
1.4
1.3
1.0
1.7
1.7
2.5
3.3
4.1
4.4
5.1
5.1
5.0
5.7
4.8
5.2
5.5
6.0
5.6
5.9
6.1
6.4
6.5
6.9
6.5
6.0
5.1
5.4
5.5
5.7
5.9
5.7
4.8
5.2
5.3
5.0
5.1
5.3
53

(2.5)
(2.4)
3.9
0.3
1.5
(0.0)
3.9
7.8
4.9
3.3
5.8
6.0
2.1
(4.2)
0.6
(0.2)
1.5
1.4
1.1
1.8
1.8
2.6
3.4
4.3
4.6
5.3
5.2
5.2
5.9
5.0
5.3
5.7
6.2
5.7
6.1
6.3
6.6
6.7
7.1
6.7
6.1
5.3
5.5
5.6
5.9
6.0
5.9
5.0
5.3
5.4
5.1
5.2
5.4
54

(2.2)
7.3
1.3
2.6
0.5
5.0
9.4
5.9
3.9
6.6
6.8
2.4
(4.4)
0.8
(0.0)
1.7
1.6
1.3
2.0
2.0
2.9
3.7
4.6
4.9
5.6
5.6
5.5
6.2
5.3
5.6
5.9
6.5
6.0
6.4
6.6
6.9
7.0
7.4
6.9
6.3
5.5
5.7
5.8
6.1
6.2
6.1
5.1
5.5
5.6
5.3
5.4
5.6
56

17.7
3.0
4.2
1.2
6.6
11.5
7.1
4.7
7.7
7.7
2.9
(4.5)
1.0
0.1
2.0
1.9
1.5
2.3
2.2
3.1
4.0
4.9
5.3
5.9
5.9
5.8
6.5
5.5
5.9
6.2
6.8
6.3
6.6
6.8
7.2
7.3
7.6
7.2
6.6
5.7
5.9
6.0
6.3
6.4
6.3
5.3
5.7
5.8
5.5
5.5
5.7
57

(9.8)
(1.9)
(3.8)
3.9
10.3
5.4
3.0
6.5
6.7
1.5
(6.3)
(0.2)
(1.1)
1.0
0.9
0.5
1.4
1.4
2.4
3.3
4.3
4.7
5.4
5.4
5.4
6.1
5.1
5.5
5.9
6.4
5.9
6.3
6.5
6.9
7.0
7.4
6.9
6.3
5.4
5.6
5.7
6.0
6.1
6.0
5.0
5.4
5.5
5.2
5.3
5.5
55

6.6
(0.7)
9.0
16.0
8.8
5.3
9.0
8.9
2.8
(6.0)
0.7
(0.4)
1.8
1.7
1.3
2.2
2.1
3.2
4.1
5.1
5.5
6.2
6.1
6.1
6.8
5.7
6.1
6.5
7.1
6.5
6.9
7.1
7.4
7.5
7.9
7.4
6.8
5.8
6.1
6.1
6.4
6.5
6.4
5.4
5.8
5.9
5.6
5.6
5.9
59

(7.4)
10.2
19.3
9.3
5.0
9.4
9.2
2.4
(7.3)
0.1
(1.0)
1.5
1.4
0.9
1.9
1.9
3.0
3.9
5.0
5.4
6.2
6.1
6.0
6.8
5.7
6.1
6.5
7.1
6.5
6.9
7.1
7.4
7.5
7.9
7.4
6.8
5.8
6.0
6.1
6.4
6.5
6.4
5.4
5.8
5.9
5.5
5.6
5.8
58

31.1
35.4
39.8
15.5
8.5 (15.9)
8.4
1.7 (13.2) (10.5)
13.2
9.1
0.4
9.7
34.4
12.3
8.9
2.3
9.1
20.5
8.1
3.9
(0.1)
(6.6)
(4.1)
(1.9) (16.2) (35.0)
(7.3) (11.8) (18.3) (18.7) (20.7) (33.5) (47.8) (58.1)
1.0
(2.3)
(7.2)
(5.6)
(4.6) (12.4) (18.4)
(8.6)
(0.3)
(3.3)
(7.7)
(6.4)
(5.7) (12.2) (16.6)
(9.4)
2.3
(0.2)
(3.9)
(2.3)
(1.0)
(5.9)
(8.5)
(0.4)
2.1
(0.2)
(3.5)
(2.0)
(0.9)
(5.1)
(7.1)
(0.3)
1.6
(0.6)
(3.6)
(2.3)
(1.3)
(5.1)
(6.8)
(1.1)
2.6
0.7
(2.0)
(0.7)
0.4
(2.8)
(4.1)
1.4
2.5
0.7
(1.8)
(0.5)
0.5
(2.4)
(3.5)
1.4
3.6
2.0
(0.2)
1.1
2.1
(0.4)
(1.2)
3.5
4.6
3.2
1.1
2.5
3.5
1.3
0.7
5.2
5.7
4.4
2.5
3.9
5.0
3.0
2.6
6.9
6.1
4.9
3.1
4.5
5.5
3.7
3.4
7.5
6.9
5.8
4.1
5.4
6.5
4.9
4.7
8.6
6.8
5.7
4.2
5.4
6.4
4.9
4.7
8.3
6.7
5.7
4.2
5.4
6.3
4.9
4.7
8.0
7.5
6.5
5.1
6.3
7.3
5.9
5.8
9.1
6.3
5.3
4.0
5.0
5.9
4.6
4.4
7.3
6.7
5.7
4.5
5.5
6.3
5.1
4.9
7.8
7.0
6.2
5.0
6.0
6.8
5.6
5.5
8.2
7.6
6.8
5.7
6.7
7.5
6.4
6.4
9.0
7.0
6.2
5.1
6.0
6.8
5.7
5.6
8.1
7.4
6.7
5.6
6.5
7.3
6.3
6.2
8.6
7.6
6.9
5.9
6.8
7.5
6.5
6.5
8.8
8.0
7.3
6.3
7.2
7.9
7.0
6.9
9.2
8.0
7.4
6.4
7.3
8.0
7.1
7.1
9.2
8.4
7.8
6.9
7.7
8.4
7.6
7.6
9.7
7.9
7.3
6.4
7.2
7.8
7.0
7.0
9.0
7.2
6.6
5.7
6.5
7.0
6.2
6.2
8.1
6.2
5.5
4.7
5.3
5.9
5.1
5.0
6.7
6.4
5.8
5.0
5.7
6.2
5.4
5.3
7.0
6.5
5.9
5.1
5.8
6.3
5.5
5.4
7.1
6.8
6.2
5.4
6.1
6.6
5.9
5.8
7.5
6.9
6.4
5.6
6.2
6.8
6.1
6.0
7.6
6.8
6.2
5.5
6.1
6.6
5.9
5.8
7.4
5.7
5.1
4.4
5.0
5.4
4.7
4.6
6.1
6.1
5.6
4.9
5.4
5.9
5.2
5.1
6.6
6.2
5.7
5.0
5.5
6.0
5.3
5.2
6.6
5.8
5.3
4.6
5.2
5.6
5.0
4.9
6.2
5.9
5.4
4.7
5.3
5.7
5.1
5.0
6.3
6.1
61
5.7
57
5.0
50
5.5
55
5.9
59
5.3
53
5.3
53
6.5
65

1954

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1955

1967

1968

INVESTMENT FROM END YEAR

1969

1970

1971

1972

1973

99.6
33.2 (11.1)
33.0
8.5
23.9
5.7
17.5
2.9
17.4
5.6
15.0
4.9
15.8
7.2
16.5
9.0
17.4
10.7
17.1
11.0
17.5
12.0
16.5
11.4
15.6
10.9
16.3
11.9
13.8
9.6
13.9
10.0
14.1
10.4
14.6
11.2
13.3
10.0
13.6
10.5
13.6
10.6
13.8
11.0
13.7
10.9
14.0
11.4
13.0
10.5
11.9
9.4
10.3
8.0
10.6
8.3
10.5
8.3
10.8
8.6
10.8
8.7
10.5
8.5
9.0
7.0
9.4
7.5
9.4
7.6
8.9
7.1
8.9
7.1
9.1
91
7.4
74
1974

1975

32.5
15.2
8.1
10.3
8.4
10.6
12.2
13.8
13.8
14.6
13.7
12.9
13.9
11.3
11.6
11.9
12.6
11.3
11.7
11.8
12.1
12.1
12.5
11.5
10.4
8.8
9.1
9.0
9.4
9.4
9.2
7.6
8.1
8.2
7.7
7.7
8.0
80

0.2
(2.4)
3.7
3.1
6.6
9.1
11.3
11.6
12.8
12.0
11.3
12.4
9.8
10.2
10.6
11.5
10.2
10.7
10.8
11.2
11.2
11.6
10.7
9.5
7.9
8.2
8.3
8.6
8.7
8.5
6.9
7.5
7.5
7.0
7.1
7.3
73

(4.9)
5.5
4.1
8.3
11.0
13.3
13.4
14.5
13.4
12.4
13.6
10.6
11.0
11.4
12.3
10.8
11.3
11.4
11.8
11.8
12.2
11.2
9.9
8.2
8.6
8.6
8.9
9.0
8.7
7.1
7.7
7.7
7.2
7.3
7.6
76

17.1
8.9
13.1
15.3
17.4
16.7
17.6
15.9
14.6
15.6
12.2
12.4
12.8
13.6
12.0
12.4
12.5
12.8
12.7
13.1
12.0
10.7
8.8
9.2
9.2
9.5
9.6
9.3
7.6
8.1
8.2
7.6
7.7
7.9
79

1.3
11.1
14.7
17.4
16.7
17.7
15.7
14.2
15.5
11.7
12.0
12.4
13.4
11.6
12.1
12.2
12.6
12.5
12.9
11.8
10.4
8.5
8.8
8.8
9.2
9.3
9.0
7.3
7.9
7.9
7.3
7.4
7.7
77

21.9
22.1
23.3
20.8
21.2
18.3
16.2
17.4
12.9
13.2
13.5
14.4
12.5
12.9
12.9
13.3
13.2
13.6
12.3
10.9
8.8
9.2
9.2
9.6
9.6
9.3
7.5
8.1
8.1
7.5
7.6
7.9
79

22.3
24.0
20.5
21.0
17.6
15.3
16.7
11.8
12.2
12.7
13.8
11.7
12.3
12.3
12.8
12.6
13.2
11.8
10.3
8.2
8.6
8.6
9.1
9.2
8.8
7.0
7.6
7.7
7.1
7.1
7.5
75

25.8
19.6
20.6
16.5
13.9
15.8
10.4
11.0
11.7
12.9
10.8
11.5
11.6
12.1
12.0
12.6
11.2
9.7
7.5
8.0
8.0
8.5
8.6
8.3
6.4
7.1
7.2
6.6
6.7
7.0
70

13.7
18.1
13.5
11.2
13.9
8.0
9.1
10.0
11.6
9.4
10.2
10.5
11.1
11.1
11.8
10.4
8.8
6.6
7.1
7.2
7.7
7.9
7.6
5.7
6.4
6.5
5.9
6.0
6.4
64

22.7
13.4
10.3
14.0
6.9
8.3
9.5
11.3
8.9
9.9
10.2
10.9
10.9
11.6
10.2
8.5
6.2
6.8
6.9
7.4
7.6
7.3
5.3
6.1
6.2
5.6
5.8
6.1
61

4.8
4.6
11.2
3.3
5.6
7.4
9.8
7.3
8.6
9.0
9.9
10.0
10.8
9.3
7.6
5.2
5.9
6.0
6.7
6.9
6.6
4.6
5.4
5.6
5.0
5.1
5.6
56

4.4
14.6
2.8
5.9
8.0
10.7
7.7
9.1
9.5
10.4
10.5
11.3
9.7
7.8
5.3
6.0
6.1
6.8
7.0
6.7
4.6
5.5
5.6
5.0
5.2
5.6
56

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

25.8
2.0 (17.4)
6.4
(2.2)
8.9
3.7
11.9
8.7
8.2
5.0
9.7
7.3
10.1
8.1
11.1
9.4
11.1
9.5
12.0
10.7
10.1
8.8
8.1
6.7
5.3
3.9
6.1
4.8
6.2
5.0
6.9
5.9
7.2
6.2
6.9
5.9
4.6
3.6
5.5
4.6
5.7
4.8
5.0
4.2
5.2
4.4
5.7
57
4.9
49
1988

1989

15.7
16.2
19.1
11.5
13.0
13.0
13.9
13.5
14.4
11.8
9.2
5.9
6.7
6.9
7.6
7.9
7.4
4.9
5.9
6.0
5.3
5.5
6.0
60

16.8
20.9
10.1
12.3
12.5
13.6
13.2
14.2
11.4
8.6
5.1
6.0
6.2
7.1
7.4
6.9
4.3
5.4
5.6
4.8
5.0
5.6
56

25.1
7.0
10.9
11.4
13.0
12.6
13.8
10.7
7.7
3.9
5.1
5.4
6.4
6.7
6.3
3.5
4.7
5.0
4.3
4.5
5.1
51

(8.6)
4.4
7.2
10.1
10.2
12.0
8.8
5.7
1.8
3.2
3.7
4.9
5.4
5.1
2.2
3.6
3.9
3.2
3.5
4.1
41

19.2
16.1
17.1
15.5
16.7
12.0
7.9
3.2
4.6
5.0
6.2
6.7
6.2
3.1
4.4
4.7
3.9
4.2
4.9
49

13.1
16.1
14.3
16.1
10.7
6.2
1.1
3.0
3.6
5.0
5.6
5.2
1.9
3.5
3.8
3.1
3.4
4.1
41

19.3
14.9
17.1
10.1
4.8
(0.8)
1.6
2.5
4.2
4.9
4.5
1.0
2.8
3.2
2.4
2.8
3.6
36

10.6
16.0
7.2
1.5
(4.3)
(1.1)
0.3
2.4
3.4
3.1
(0.5)
1.5
2.0
1.3
1.8
2.7
27

21.7
5.5
(8.6)
(1.4) (11.2) (13.8)
(7.8) (15.9) (19.3) (24.5)
(3.3)
(8.7)
(8.7)
(6.1)
(1.4)
(5.4)
(4.6)
(1.4)
1.3
(1.8)
(0.3)
3.4
2.5
0.0
1.5
4.9
2.3
0.2
1.5
4.3
(1.5)
(3.8)
(3.2)
(1.6)
0.7
(1.2)
(0.3)
1.5
1.4
(0.3)
0.6
2.3
0.6
(1.0)
(0.2)
1.2
1.2
(0.2)
0.5
1.9
2.2
22
0.9
09
1.7
17
3.1
31

1990

1991

1992

1993

1994

1995

1996

1997

1998

INVESTMENT FROM END YEAR

1999

2000

2001

16.9
12.8
14.8
13.9
11.2
2.9
5.9
6.3
4.6
5.0
6.1
61

8.8
13.7
13.0
9.9
0.3
4.1
4.8
3.1
3.8
5.0
50

18.9
15.1
10.2
(1.8)
3.3
4.2
2.4
3.1
4.6
46

11.4
6.1
1.0
(7.8) (16.2)
(0.3)
(4.0)
1.5
(0.9)
(0.2)
(2.3)
1.1
(0.6)
3.0
30
1.8
18

2002

2003

2004

2005

2006

(30.4)
(6.4)
(1.5)
(3.2)
(0.9)
2.0
20

25.9
17.1
8.1
8.3
10.0
10 0

8.9
0.2
3.0
6.4
64

(7.8)
0.1
5.6
56

8.7
13.0
13 0

17.4
17 4

2007

2008

2009

2010

2011

2012

1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

INVESTMENT TO END YEAR


IN

INVESTMENT TO END YEAR


R

INVESTMENT FROM END YEAR


1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

UK real capital value of equities


(annual average rates of return between year-ends)

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

1917

1918

1919

1920

1921

1922

1923

INVESTMENT FROM END YEAR


1924

1925

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

INVESTMENT FROM END YEAR


1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

INVESTMENT FROM END YEAR

1899

1900

1901

1902

105
97
95
92
100
99
112
97
95
101
99
94
90
83
80
64
51
44
44
46
29
36
48
47
53
59
60
66
74
61
59
47
62
75
82
88
99
78
68
59
47
53
61
65
70
71
80
73
64
55
57
52
46
54
74
74
62
55
76
113
108
101
94
106
91
92
81
101
137
111
95
124
130
81
30
57
48
60
57
51
56
54
62
73
88
95
112
113
113
136
107
117
131
159
140
161
175
202
218
260
233
195
142
161
170
197
213
209
139
170
180
160
168
191

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

92
90
88
95
94
107
92
91
97
95
89
86
79
76
61
48
42
42
44
28
35
46
45
50
57
57
63
71
58
57
45
59
72
78
84
94
74
65
56
45
51
58
62
67
67
76
69
61
53
54
50
44
51
70
70
59
52
72
108
103
96
89
101
87
88
77
97
131
106
91
118
124
77
29
55
46
57
54
48
53
51
59
69
83
91
107
108
107
130
102
112
125
152
133
153
167
193
208
248
222
186
136
154
162
188
203
199
133
162
172
153
160
182

98
95
103
102
116
100
99
105
103
97
93
86
82
67
52
45
46
48
30
38
50
49
55
62
62
68
77
63
61
49
64
78
85
91
102
80
70
61
49
55
63
68
72
73
83
75
66
57
59
54
48
56
76
76
64
57
78
117
112
104
97
110
94
96
84
105
142
115
99
129
135
84
31
59
50
62
59
53
58
56
64
75
91
99
116
117
117
141
110
122
136
165
145
166
181
209
226
269
241
202
147
167
176
204
221
217
144
176
186
166
174
198

97
105
104
118
102
101
107
105
99
95
88
84
68
53
46
47
49
30
38
51
49
56
63
63
70
79
64
63
50
66
79
86
93
104
82
71
62
50
56
64
69
74
75
84
77
67
59
60
55
49
57
78
78
65
58
80
120
114
106
99
112
96
97
85
107
145
117
101
131
137
85
32
60
51
64
60
54
59
57
66
77
92
101
119
119
119
144
112
124
139
168
148
169
185
213
230
274
245
206
150
170
180
208
225
221
147
179
190
169
177
202

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2010

2011

2012

2013

108
107
121
105
103
110
108
102
97
90
86
70
55
47
48
50
31
39
52
51
57
65
65
72
81
66
64
51
67
81
89
96
107
84
73
64
51
58
66
71
76
77
87
79
69
60
62
57
50
58
80
80
67
59
82
123
118
109
102
115
99
100
88
110
149
121
103
135
141
88
33
62
52
65
62
55
61
58
67
79
95
103
122
123
122
148
116
127
143
173
152
174
190
219
237
282
252
212
154
175
185
214
231
227
151
184
195
174
182
207

99
112
97
96
102
100
94
90
84
80
65
51
44
44
47
29
36
48
47
53
60
60
66
75
61
60
47
63
75
82
88
99
78
68
59
47
54
61
66
70
71
80
73
64
56
57
52
46
54
74
74
62
55
76
114
109
101
94
107
91
93
81
102
138
112
96
125
131
81
30
58
48
61
57
51
56
54
62
73
88
96
113
114
113
137
107
118
132
160
141
161
176
203
219
261
234
196
143
162
171
198
214
210
140
171
181
161
169
192

113
98
96
103
100
95
91
84
81
65
51
44
45
47
29
37
49
47
54
60
61
67
75
61
60
48
63
76
83
89
100
79
69
60
48
54
61
66
71
72
81
74
65
56
57
53
47
54
75
75
62
55
77
115
110
102
95
107
92
93
82
103
139
113
97
126
132
82
31
58
48
61
58
51
57
54
63
74
89
97
114
114
114
138
108
119
133
161
142
163
177
205
221
263
235
198
144
163
172
199
216
212
141
172
182
162
170
194

87
85
91
89
84
80
75
71
58
45
39
39
42
26
32
43
42
47
53
54
59
67
54
53
42
56
67
73
79
88
69
61
53
42
48
54
58
63
63
72
65
57
50
51
47
41
48
66
66
55
49
68
101
97
90
84
95
81
82
72
91
123
99
85
111
116
72
27
51
43
54
51
45
50
48
56
65
78
85
101
101
101
122
95
105
118
142
125
144
156
181
195
233
208
175
127
144
152
176
191
187
125
152
161
143
150
171

98
104
102
97
93
86
82
66
52
45
46
48
30
37
50
48
55
61
62
68
77
63
61
48
64
77
84
91
102
80
70
61
49
55
63
67
72
73
83
75
66
57
59
54
48
56
76
76
63
56
78
117
112
104
97
109
94
95
83
105
142
115
98
128
134
83
31
59
49
62
59
52
58
55
64
75
90
98
116
117
116
140
110
121
136
164
144
166
181
209
225
268
240
202
147
167
176
203
220
216
144
175
186
165
174
197

106
104
98
94
87
84
68
53
46
46
49
30
38
50
49
56
62
63
69
78
64
62
49
65
79
86
92
104
81
71
62
50
56
64
68
73
74
84
76
67
58
60
55
48
57
77
77
65
57
80
119
114
106
98
111
96
97
85
106
144
117
100
130
137
85
32
60
50
63
60
53
59
56
65
76
92
100
118
119
118
143
112
123
138
167
147
169
184
212
229
273
244
205
149
169
179
207
224
220
146
178
189
168
177
201

98
92
89
82
79
64
50
43
44
46
29
36
47
46
52
59
59
65
74
60
59
46
61
74
81
87
97
77
67
58
47
53
60
64
69
70
79
72
63
55
56
51
46
53
73
73
61
54
75
112
107
99
93
105
90
91
80
100
136
110
94
123
128
80
30
57
47
60
56
50
55
53
61
72
86
94
111
112
111
134
105
116
130
157
138
159
173
200
216
257
230
193
141
159
168
194
211
206
138
168
178
158
166
189

94
90
84
80
65
51
44
44
47
29
37
48
47
53
60
60
66
75
61
60
47
63
76
82
89
99
78
68
60
48
54
61
66
71
71
81
73
64
56
57
53
47
54
74
74
62
55
76
114
109
102
95
107
92
93
81
102
138
112
96
125
131
81
31
58
48
61
58
51
57
54
63
73
88
96
113
114
114
137
107
118
132
160
141
162
176
204
220
262
234
197
144
163
172
198
215
211
140
171
181
161
170
193

96
89
85
69
54
47
47
50
31
39
51
50
57
64
64
70
80
65
63
50
66
80
87
94
105
83
72
63
50
57
65
70
75
76
86
78
68
59
61
56
49
58
79
79
66
58
81
121
116
108
100
113
97
99
86
108
147
119
102
133
139
86
32
61
51
64
61
54
60
57
66
78
94
102
120
121
120
145
114
125
140
170
149
172
187
216
233
278
248
209
152
173
182
210
228
223
149
182
192
171
180
204

93
89
72
57
49
49
52
32
40
54
52
59
66
67
74
83
68
66
52
69
84
91
98
110
87
76
66
53
60
68
73
78
79
89
81
71
62
63
58
51
60
82
82
69
61
85
126
121
112
105
118
102
103
90
113
153
124
106
138
145
90
34
64
53
67
64
57
63
60
69
81
98
106
125
126
126
152
119
131
147
177
156
179
195
226
243
290
259
218
159
180
190
220
238
233
155
190
201
179
188
213

96
77
61
52
53
56
35
44
58
56
63
71
72
79
89
73
71
56
75
90
98
106
118
93
81
71
57
64
73
78
84
85
96
87
77
67
68
63
55
65
88
88
74
66
91
136
130
121
113
127
109
111
97
122
165
134
114
149
156
97
36
69
57
72
68
61
67
64
75
87
105
114
135
136
135
163
128
141
158
191
168
193
210
243
262
312
279
234
171
194
204
236
256
251
167
204
216
192
202
229

81
64
55
55
58
36
46
60
59
66
75
75
83
93
76
74
59
78
94
103
110
124
97
85
74
59
67
76
82
88
89
101
91
80
70
71
65
58
68
93
93
77
69
95
142
136
126
118
133
114
116
101
127
172
140
120
156
163
101
38
72
60
76
72
64
70
67
78
91
110
120
141
142
141
171
134
147
165
200
176
202
220
254
274
326
292
245
179
203
214
247
268
263
175
213
226
201
211
240

79
68
68
72
45
56
75
73
82
92
93
102
116
94
92
73
97
116
127
137
153
120
105
92
73
83
94
101
109
110
124
113
99
86
88
81
72
84
114
114
95
85
118
176
168
156
146
165
141
143
125
157
213
173
148
193
202
125
47
89
74
94
89
79
87
83
96
113
136
148
175
175
175
211
165
182
204
247
217
249
272
314
339
404
361
303
221
250
264
305
331
325
216
264
279
249
261
297

86
87
92
57
72
95
93
104
117
118
130
147
120
117
93
123
148
161
174
195
153
134
117
93
105
120
129
138
139
158
144
126
109
112
103
91
106
145
145
121
108
150
224
214
199
185
209
180
182
159
200
271
220
188
245
257
159
60
113
94
119
113
100
111
106
123
143
173
188
222
223
222
268
210
232
259
314
276
317
345
399
431
513
459
386
281
319
336
388
421
413
275
335
355
316
332
377

101
106
66
83
110
107
121
136
137
151
170
139
136
108
142
172
187
201
226
178
155
135
108
122
139
149
160
162
183
166
146
127
130
119
106
123
169
169
141
125
173
259
248
231
215
243
208
211
185
232
314
255
218
284
298
185
69
131
110
138
131
116
128
123
142
166
200
218
257
259
258
311
244
269
301
364
320
367
401
463
500
595
532
447
326
369
390
450
488
479
319
389
412
367
385
437

105
65
82
109
106
120
135
136
150
169
137
134
106
141
170
185
200
224
176
154
134
107
121
137
148
159
160
182
165
145
126
129
118
105
122
167
167
140
124
172
257
246
228
213
240
206
209
183
230
311
252
216
281
295
183
69
130
109
137
129
115
127
122
141
165
198
216
255
256
255
308
242
266
298
361
317
364
397
458
495
590
527
443
323
366
386
446
483
474
316
385
408
363
381
433

62
78
103
101
114
128
129
142
160
130
128
101
134
161
176
189
212
167
146
127
102
115
130
140
151
152
172
157
138
119
122
112
99
116
159
159
132
118
163
244
233
217
202
228
196
199
174
218
296
240
205
267
280
174
65
123
103
130
123
109
121
116
134
156
188
205
242
243
243
293
229
253
283
342
301
346
377
435
470
560
501
420
306
347
367
424
459
450
300
366
387
345
362
411

126
166
162
183
206
207
228
258
210
205
163
215
260
283
305
341
269
234
205
163
185
210
226
242
245
277
252
221
192
196
181
160
186
255
255
213
189
262
392
375
349
325
367
315
319
279
351
475
385
330
430
450
280
105
198
166
209
198
176
194
186
215
251
303
330
389
391
390
471
369
406
455
551
484
556
606
700
755
900
805
676
493
559
590
681
738
724
482
588
623
554
582
662

132
129
146
164
165
182
205
167
163
130
172
207
225
243
272
214
187
163
130
147
167
180
193
195
221
201
176
153
156
144
127
148
203
203
170
151
209
312
299
278
259
292
251
254
223
280
379
307
263
342
359
223
83
158
132
166
157
140
155
148
171
200
241
263
310
312
311
375
294
324
362
439
386
443
483
558
602
717
641
539
393
445
470
543
588
577
384
469
496
442
464
527

98
110
124
125
137
155
126
123
98
129
156
170
183
205
161
141
123
98
111
126
136
146
147
167
151
133
115
118
109
96
112
153
153
128
114
158
236
226
210
195
221
190
192
168
211
286
232
199
258
271
168
63
119
100
125
119
106
117
112
129
151
182
199
234
235
235
283
222
244
274
331
291
334
364
421
454
541
484
407
296
336
355
410
444
435
290
354
375
333
350
398

113
127
128
141
159
129
126
100
133
160
174
188
210
165
144
126
101
114
129
139
149
151
171
155
136
118
121
111
98
115
157
157
131
117
162
242
231
215
200
226
194
197
172
216
293
237
203
265
277
172
65
122
102
128
122
108
120
114
133
155
187
203
240
241
240
290
227
250
280
339
298
342
373
431
465
555
496
417
304
344
363
420
455
446
297
362
384
342
359
408

112
113
125
141
115
112
89
118
142
155
166
186
147
128
112
89
101
115
123
132
134
151
137
121
105
107
99
87
102
139
139
116
103
143
214
205
190
177
201
172
174
153
192
260
210
180
235
246
153
57
108
90
114
108
96
106
101
117
137
165
180
213
214
213
257
202
222
248
301
264
304
331
382
413
492
440
369
269
305
322
372
403
395
263
321
340
303
318
361

101
111
125
102
100
79
105
126
137
148
166
130
114
100
79
90
102
110
118
119
135
122
108
93
95
88
78
91
124
124
103
92
127
190
182
169
158
178
153
155
136
171
231
187
160
209
219
136
51
96
80
101
96
85
94
90
104
122
147
160
189
190
189
229
179
197
221
268
235
270
294
340
367
437
391
328
239
271
286
331
359
352
234
286
303
269
283
321

110
124
101
99
78
104
125
137
147
165
130
113
99
79
89
101
109
117
118
134
121
107
93
95
87
77
90
123
123
103
91
127
189
181
168
157
177
152
154
135
169
229
186
159
207
217
135
51
96
80
101
95
85
94
90
104
121
146
159
188
189
188
227
178
196
219
266
234
268
292
338
364
434
388
326
238
270
284
329
356
349
233
284
300
268
281
319

113
92
90
71
94
114
124
133
150
118
103
90
71
81
92
99
106
107
121
110
97
84
86
79
70
82
112
112
93
83
115
172
164
153
142
161
138
140
122
154
208
169
145
188
197
122
46
87
73
91
87
77
85
81
94
110
133
145
171
171
171
206
162
178
199
241
212
243
265
307
331
394
353
296
216
245
258
298
323
317
211
258
273
243
255
290

81
80
63
84
101
110
118
133
104
91
80
63
72
81
88
94
95
108
98
86
74
76
70
62
72
99
99
83
73
102
152
146
135
126
142
122
124
108
136
184
149
128
167
175
108
41
77
64
81
77
68
75
72
83
98
118
128
151
152
151
183
143
158
177
214
188
216
235
272
293
349
312
262
191
217
229
264
286
281
187
228
242
215
226
257

98
78
103
124
135
145
163
128
112
98
78
88
100
108
116
117
132
120
106
92
94
86
76
89
122
122
102
90
125
187
179
166
155
175
150
152
133
167
227
184
157
205
215
133
50
95
79
99
94
84
93
89
103
120
144
157
186
187
186
225
176
194
217
263
231
265
289
334
360
429
384
322
235
266
281
325
352
345
230
281
297
264
278
316

79
105
127
138
148
166
131
114
100
80
90
102
110
118
119
135
123
108
94
96
88
78
91
124
124
104
92
128
191
183
170
158
179
154
156
136
171
232
188
161
209
219
136
51
97
81
102
96
86
95
91
105
123
148
161
190
191
190
229
180
198
222
268
236
271
295
341
368
439
392
329
240
272
287
332
360
353
235
287
304
270
284
322

132
160
174
187
210
165
144
126
100
114
129
139
149
150
170
155
136
118
121
111
98
115
157
157
131
116
161
241
231
214
200
226
194
196
172
216
292
237
203
264
277
172
64
122
102
128
121
108
119
114
132
155
186
203
239
241
240
290
227
250
280
339
298
342
373
430
465
554
495
416
303
344
363
419
454
445
296
362
383
341
358
407

121
131
142
159
125
109
95
76
86
97
105
113
114
129
117
103
89
91
84
74
87
118
118
99
88
122
182
174
162
151
171
146
148
130
163
221
179
153
200
209
130
49
92
77
97
92
82
90
86
100
117
141
153
181
182
181
219
171
189
211
256
225
258
281
325
351
418
374
314
229
260
274
316
343
336
224
273
289
258
270
307

109
117
132
103
90
79
63
71
81
87
93
94
107
97
85
74
76
70
62
72
98
98
82
73
101
151
144
134
125
141
121
123
108
135
183
148
127
166
173
108
40
76
64
80
76
68
75
72
83
97
117
127
150
151
150
181
142
157
175
212
186
214
233
270
291
347
310
260
190
215
227
262
284
279
186
227
240
214
224
255

108
121
95
83
72
58
65
74
80
86
86
98
89
78
68
69
64
56
66
90
90
75
67
93
139
132
123
115
130
111
113
99
124
168
136
117
152
159
99
37
70
59
74
70
62
69
66
76
89
107
117
138
138
138
166
130
144
161
195
171
196
214
247
267
318
284
239
174
197
208
241
261
256
170
208
220
196
206
234

112
88
77
67
54
61
69
74
80
80
91
83
73
63
64
59
52
61
84
84
70
62
86
129
123
114
107
120
103
105
92
115
156
126
108
141
148
92
34
65
54
68
65
58
64
61
71
83
99
108
128
128
128
155
121
133
149
181
159
182
199
230
248
295
264
222
162
183
194
224
242
238
158
193
204
182
191
217

79
69
60
48
54
61
66
71
72
81
74
65
56
58
53
47
55
75
75
62
55
77
115
110
102
95
108
92
94
82
103
139
113
97
126
132
82
31
58
49
61
58
51
57
54
63
74
89
97
114
115
114
138
108
119
133
161
142
163
177
205
221
264
236
198
144
164
173
200
216
212
141
172
182
162
171
194

87
76
61
69
78
84
90
91
103
94
82
71
73
67
59
69
95
95
79
71
98
146
140
130
121
137
117
119
104
131
177
143
123
160
168
104
39
74
62
78
74
65
72
69
80
94
113
123
145
146
145
175
137
151
169
205
180
207
226
261
281
335
300
252
184
208
220
254
275
270
180
219
232
206
217
246

87
70
79
89
96
103
104
118
107
94
82
84
77
68
79
109
109
91
81
112
167
160
149
138
157
134
136
119
150
203
164
141
183
192
119
45
85
71
89
84
75
83
79
92
107
129
141
166
167
166
201
157
173
194
235
206
237
258
299
322
384
343
288
210
238
252
291
315
309
206
251
266
237
248
282

80
90
102
110
118
119
135
123
108
94
96
88
78
91
125
124
104
92
128
191
183
170
158
179
154
156
136
171
232
188
161
210
220
136
51
97
81
102
96
86
95
91
105
123
148
161
190
191
190
230
180
198
222
269
236
271
296
342
369
439
393
330
241
273
288
333
360
353
235
287
304
271
284
323

113
129
138
148
150
170
154
136
118
120
111
98
114
156
156
131
116
161
240
230
214
199
225
193
196
171
215
291
236
202
263
276
171
64
122
102
128
121
108
119
114
132
154
186
202
239
240
239
288
226
249
279
337
297
340
371
429
463
551
493
414
302
342
361
417
452
443
295
360
382
340
357
405

113
122
131
132
150
136
120
104
106
98
86
101
138
138
115
102
142
212
203
189
176
199
170
173
151
190
257
208
179
232
244
151
57
107
90
113
107
95
105
100
116
136
164
179
211
212
211
255
200
220
246
298
262
301
328
378
409
487
435
366
266
302
319
368
399
391
261
318
337
300
315
358

108
115
117
132
120
106
92
94
86
76
89
122
122
102
90
125
187
179
166
155
175
150
152
133
167
227
184
157
205
215
133
50
95
79
99
94
84
93
89
103
120
144
157
186
186
186
224
176
194
217
263
231
265
289
334
360
429
384
322
235
266
281
325
352
345
230
280
297
264
278
315

107
108
123
111
98
85
87
80
71
83
113
113
94
84
116
174
166
154
144
163
140
141
124
155
210
171
146
190
199
124
46
88
73
92
87
78
86
82
95
111
134
146
172
173
173
208
163
180
201
244
214
246
268
310
335
399
356
299
218
247
261
302
327
321
213
260
276
246
258
293

101
114
104
91
79
81
75
66
77
105
105
88
78
108
162
155
144
134
152
130
132
115
145
196
159
136
177
186
115
43
82
68
86
82
73
80
77
89
104
125
136
161
161
161
194
152
168
188
227
200
229
250
289
312
372
332
279
203
231
243
281
305
299
199
243
257
229
240
273

113
103
90
78
80
74
65
76
104
104
87
77
107
160
153
143
133
150
129
131
114
143
194
157
135
176
184
114
43
81
68
85
81
72
79
76
88
103
124
135
159
160
159
193
151
166
186
225
198
227
248
286
309
368
329
276
201
228
241
279
302
296
197
241
255
227
238
271

91
80
69
71
65
58
67
92
92
77
68
95
141
135
126
117
132
114
115
101
127
172
139
119
155
162
101
38
72
60
75
71
63
70
67
78
91
109
119
141
141
141
170
133
147
164
199
175
201
219
253
273
325
290
244
178
202
213
246
266
261
174
212
225
200
210
239

88
76
78
72
63
74
101
101
85
75
104
156
149
139
129
146
125
127
111
139
189
153
131
171
179
111
42
79
66
83
78
70
77
74
85
100
120
131
155
155
155
187
147
161
181
219
192
221
241
278
300
358
320
269
196
222
234
271
293
288
191
234
247
220
231
263

87
89
82
72
84
115
115
96
86
119
177
169
158
147
166
142
144
126
159
215
174
149
194
203
126
47
90
75
94
89
79
88
84
97
114
137
149
176
177
176
213
167
184
206
249
219
251
274
316
341
407
364
305
223
252
266
308
333
327
218
266
281
251
263
299

102
94
83
97
133
133
111
99
137
204
195
182
169
191
164
166
146
183
248
201
172
224
235
146
55
103
86
109
103
92
101
97
112
131
158
172
203
204
203
245
192
212
237
287
252
290
316
365
394
469
419
352
257
291
307
355
385
377
251
306
324
289
303
345

92
81
95
130
130
108
96
134
200
191
178
165
187
160
163
142
179
242
196
168
219
229
142
53
101
84
106
101
90
99
95
110
128
154
168
198
199
199
240
188
207
232
280
246
283
308
356
385
458
410
344
251
284
300
347
376
369
245
299
317
282
296
337

89
103
141
141
118
105
145
217
208
193
180
203
175
177
155
194
263
213
183
238
249
155
58
110
92
116
109
97
108
103
119
139
168
183
216
217
216
261
204
225
252
305
268
308
336
388
419
499
446
375
273
310
327
377
409
401
267
326
345
307
323
367

117
160
160
133
119
164
245
235
218
203
230
197
200
175
220
298
241
207
269
282
175
66
124
104
131
124
110
121
116
135
157
190
207
244
245
244
295
231
254
285
345
303
348
379
438
473
563
504
423
308
350
369
426
462
453
302
368
390
347
364
414

137
137
114
102
141
210
201
187
174
197
169
171
150
188
255
207
177
231
242
150
56
106
89
112
106
94
104
100
115
135
163
177
209
210
209
253
198
218
244
296
260
298
325
376
405
483
432
363
264
300
316
366
396
389
259
316
334
298
312
355

100
84
74
103
154
147
137
127
144
124
125
110
138
186
151
129
168
177
110
41
78
65
82
77
69
76
73
84
99
119
129
153
153
153
185
145
159
178
216
190
218
237
274
296
353
316
265
193
219
231
267
289
284
189
231
244
217
228
259

84
74
103
154
147
137
127
144
124
125
110
138
186
151
129
168
177
110
41
78
65
82
77
69
76
73
84
99
119
129
153
153
153
185
145
159
178
216
190
218
237
274
296
353
316
265
193
219
231
267
289
284
189
231
244
217
228
259

89
123
184
176
164
152
172
148
150
131
165
223
181
155
202
211
131
49
93
78
98
93
83
91
87
101
118
142
155
183
184
183
221
173
191
214
259
227
261
284
329
355
423
378
317
231
262
277
320
347
340
226
276
292
260
273
311

139
207
198
184
171
194
166
169
148
185
251
203
174
227
238
148
55
105
87
110
104
93
102
98
114
133
160
174
206
207
206
249
195
215
240
291
256
293
320
370
399
475
425
357
260
295
311
360
390
382
255
311
329
293
307
349

149
143
133
124
140
120
122
107
134
181
147
126
164
172
107
40
76
63
80
75
67
74
71
82
96
115
126
148
149
149
179
141
155
173
210
185
212
231
267
288
343
307
258
188
213
225
260
281
276
184
224
237
211
222
252

96
89
83
94
80
81
71
90
121
98
84
110
115
71
27
51
42
53
50
45
49
47
55
64
77
84
99
100
99
120
94
104
116
140
123
142
154
179
193
230
205
172
126
143
150
174
188
185
123
150
159
141
148
169

93
87
98
84
85
75
94
127
103
88
115
120
75
28
53
44
56
53
47
52
50
57
67
81
88
104
104
104
126
98
108
121
147
129
148
162
187
201
240
215
180
131
149
157
182
197
193
129
157
166
148
155
176

93
105
90
92
80
101
136
110
95
123
129
80
30
57
48
60
57
50
56
53
62
72
87
95
112
112
112
135
106
117
130
158
139
159
174
201
217
258
231
194
141
160
169
195
212
208
138
169
179
159
167
190

113
97
98
86
108
146
119
102
132
139
86
32
61
51
64
61
54
60
57
66
77
93
102
120
120
120
145
114
125
140
170
149
171
187
216
233
277
248
208
152
172
182
210
227
223
148
181
192
171
179
204

86
87
76
96
129
105
90
117
123
76
29
54
45
57
54
48
53
51
59
68
83
90
106
107
106
128
100
111
124
150
132
151
165
191
206
245
219
184
134
152
161
186
201
197
131
160
170
151
159
180

101
89
111
151
122
105
136
143
89
33
63
53
66
63
56
62
59
68
80
96
105
124
124
124
149
117
129
144
175
154
176
192
222
240
286
255
215
156
177
187
216
234
230
153
187
198
176
185
210

88
110
149
121
103
135
141
88
33
62
52
65
62
55
61
58
67
79
95
103
122
123
122
147
116
127
142
172
152
174
190
219
237
282
252
212
154
175
185
213
231
227
151
184
195
174
182
207

126
170
138
118
154
161
100
38
71
59
75
71
63
69
66
77
90
108
118
139
140
140
168
132
145
163
197
173
199
217
250
270
322
288
242
176
200
211
244
264
259
172
210
223
198
208
237

135
110
94
122
128
80
30
57
47
59
56
50
55
53
61
72
86
94
111
111
111
134
105
116
130
157
138
158
173
199
215
256
229
193
140
159
168
194
210
206
137
168
177
158
166
189

81
69
90
95
59
22
42
35
44
42
37
41
39
45
53
64
69
82
82
82
99
78
85
96
116
102
117
127
147
159
189
169
142
104
118
124
143
155
152
101
124
131
117
122
139

86
112
117
73
27
51
43
54
51
46
50
48
56
65
79
86
101
102
101
122
96
106
118
143
126
144
157
182
196
234
209
176
128
145
153
177
192
188
125
153
162
144
151
172

130
136
85
32
60
50
63
60
53
59
56
65
76
92
100
118
118
118
143
112
123
138
167
147
168
183
212
229
273
244
205
149
169
179
206
224
219
146
178
189
168
176
200

105
65
24
46
39
49
46
41
45
43
50
59
70
77
91
91
91
110
86
95
106
128
113
129
141
163
176
209
187
157
115
130
137
159
172
168
112
137
145
129
135
154

62
23
44
37
46
44
39
43
41
48
56
67
73
86
87
87
105
82
90
101
122
107
123
135
155
168
200
179
150
109
124
131
151
164
161
107
131
138
123
129
147

37
71
59
75
71
63
69
66
77
90
108
118
139
140
140
168
132
145
163
197
173
199
217
250
270
322
288
242
176
200
211
244
264
259
172
210
223
198
208
237

189
158
199
188
168
185
177
205
240
289
315
372
373
372
449
352
388
434
525
462
530
578
668
721
859
768
645
470
533
563
650
704
691
460
561
594
529
555
631

84
105
100
89
98
94
108
127
153
166
196
197
197
237
186
205
229
278
244
280
305
353
381
454
406
341
248
282
297
344
372
365
243
297
314
280
294
334

126
119
106
117
112
130
152
183
199
235
236
235
284
223
245
275
332
292
335
366
422
456
543
486
408
297
337
356
411
446
437
291
355
376
335
351
399

95
84
93
89
103
121
145
158
187
188
187
226
177
195
218
264
232
266
290
336
362
432
386
324
236
268
283
327
354
347
231
282
299
266
279
317

89
98
94
109
127
153
167
197
198
197
238
187
206
230
279
245
281
307
354
382
456
407
342
249
283
299
345
374
366
244
298
315
281
295
335

110
106
122
143
172
188
221
222
222
268
210
231
259
313
275
316
345
398
430
512
458
385
280
318
335
388
420
412
274
335
354
315
331
376

96
111
130
156
170
201
202
201
243
190
209
234
284
249
286
312
361
389
464
415
348
254
288
304
351
380
373
248
303
321
286
300
341

116
135
163
178
210
211
210
254
199
219
245
296
261
299
326
377
407
485
433
364
265
301
317
367
397
390
260
317
335
299
313
356

117
141
153
181
182
181
219
172
189
211
256
225
258
282
325
351
418
374
314
229
260
274
317
343
337
224
273
290
258
271
308

121
131
155
156
155
187
147
162
181
219
193
221
241
278
301
358
320
269
196
222
235
271
294
288
192
234
248
221
232
263

109
129
129
129
155
122
134
150
182
160
183
200
231
249
297
266
223
163
184
195
225
244
239
159
194
206
183
192
218

118
118
118
143
112
123
138
167
147
168
183
212
229
273
244
205
149
169
179
206
224
219
146
178
189
168
176
200

100
100
121
95
104
117
141
124
143
156
180
194
231
207
174
127
143
151
175
190
186
124
151
160
142
150
170

100
120
94
104
116
141
124
142
155
179
193
230
206
173
126
143
151
174
189
185
123
150
159
142
149
169

121
95
104
117
141
124
142
155
179
194
231
206
173
126
143
151
175
189
186
124
151
160
142
149
170

78
86
97
117
103
118
129
149
160
191
171
144
105
119
125
145
157
154
102
125
132
118
124
141

110
123
149
131
151
164
190
205
244
218
183
134
151
160
185
200
196
131
159
169
150
158
179

112
135
119
137
149
172
186
221
198
166
121
137
145
168
182
178
119
145
153
136
143
163

121
106
122
133
154
166
198
177
149
108
123
130
150
162
159
106
129
137
122
128
145

88
101
110
127
137
163
146
123
89
101
107
124
134
131
88
107
113
101
106
120

115
125
145
156
186
166
140
102
115
122
141
153
150
100
122
129
115
120
137

109
126
136
162
145
122
89
101
106
123
133
130
87
106
112
100
105
119

116
125
149
133
112
81
92
97
112
122
119
80
97
103
92
96
109

108
129
115
97
70
80
84
97
105
103
69
84
89
79
83
95

119
107
89
65
74
78
90
98
96
64
78
82
73
77
88

89
75
55
62
66
76
82
80
54
65
69
62
65
74

84
61
69
73
85
92
90
60
73
77
69
72
82

73
83
87
101
109
107
71
87
92
82
86
98

113
120
138
150
147
98
119
126
113
118
134

106
122
132
130
86
105
111
99
104
118

116
125
123
82
100
106
94
99
112

108
106
71
86
91
81
85
97

98
65
80
84
75
79
90

67
81
86
77
80
91

122
129
115
121
137

106
94
99
112

89
93
106

105
119

114

1899

1900

1901

1902

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

1917

1918

1919

1920

1921

1922

1923

1924

1925

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2010

2011

2012

2013

HOW TO USE TABLES OF RETURNS


The dates along the top (and bottom) are those on which each portfolio
starts; those down the side are the dates to which the annual rate of return
is calculated. Thus the figure at the bottom right hand corner - 114 - shows
that the real capital value of a portfolio bought at the end of December 2012
and held for one year to December 2013 was 114.
Each figure on the bottom line of the table shows the real capital value of
100 up to the end of December 2013 from the year shown below the
figure. The first figure is 191, showing that the accumulated capital value of
100 for the whole period since 1899 is 191.

INVESTMENT FROM END YEAR

The top figure in each column is the capital value in the first year, so that
reading diagonally down the table gives the capital value in each year since
1899. The table can be used to see the cumulative capital growth over any
period; thus a 100 investment made at the end of 1900 would have fallen
to 92 in one year but, over the first five years (up to the end of 1905),
would have climbed back up to 94, 6 below the original investment.

INVESTMENT FROM END YEAR

INVESTMENT FROM END YEAR

INVESTMENT FROM END YEAR

1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

INVESTMENT TO END YEAR

INVESTMENT TO END YEAR

INVESTMENT FROM END YEAR


1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

UK real return on gilts - gross income re-invested


(annual average rates of return between year ends)
1899

1900

1901

1902

(2.1)
(1.6)
(1.5)
(1.9)
(0.7)
(0.0)
0.8
(0.5)
(0.4)
(0.2)
(0.3)
(0.5)
(0.6)
(0.7)
(0.3)
(1.4)
(3.6)
(4.3)
(4.1)
(4.5)
(5.4)
(3.2)
(2.0)
(1.7)
(1.4)
(1.3)
(1.2)
(0.7)
(0.4)
(0.5)
0.2
0.3
1.4
1.5
2.1
1.9
1.8
1.4
1.3
1.1
1.1
11
1.2
1.3
1.3
1.3
1.6
1.8
1.3
1.2
0.9
0.9
0.5
0.4
0.6
0.6
0.3
0.2
(0.0)
0.2
0.2
0.1
(0.1)
0.2
0.2
01
0.1
0.1
0.1
0.1
(0.0)
(0.1)
(0.1)
0.1
(0.1)
(0.3)
(0.8)
(0.6)
(0.7)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.2)
(0.1)
(0.0)
0.0
0.1
0.2
0.2
0.2
0.2
0.3
0.5
0.7
0.6
0.7
0.7
0.9
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.2
1.2
1.2
1.3
1.3
1.2
12

(1.0)
(1.1)
(1.8)
(0.4)
0.4
1.3
(0.3)
(0.2)
0.0
(0.1)
(0.3)
(0.5)
(0.6)
(0.2)
(1.4)
(3.7)
(4.4)
(4.3)
(4.6)
(5.6)
(3.3)
(2.0)
(1.7)
(1.4)
(1.3)
(1.1)
(0.6)
(0.4)
(0.4)
0.3
0.4
1.6
1.6
2.3
2.1
1.9
1.4
1.4
1.1
1.2
12
1.3
1.4
1.3
1.4
1.7
1.8
1.4
1.3
1.0
1.0
0.6
0.4
0.6
0.7
0.3
0.2
0.0
0.3
0.3
0.1
(0.1)
0.2
0.3
01
0.1
0.1
0.1
0.1
0.0
(0.0)
(0.1)
0.1
(0.0)
(0.3)
(0.8)
(0.6)
(0.6)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.2)
(0.0)
(0.0)
0.0
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.7
0.8
0.9
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.2
1.2
1.2
1.3
1.3
1.2
12

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

(1.2)
(2.2)
(0.1)
0.8
1.7
(0.2)
(0.1)
0.1
(0.0)
(0.3)
(0.4)
(0.5)
(0.1)
(1.4)
(3.9)
(4.6)
(4.4)
(4.8)
(5.8)
(3.4)
(2.1)
(1.7)
(1.4)
(1.3)
(1.1)
(0.6)
(0.4)
(0.4)
0.3
0.4
1.6
1.7
2.4
2.1
2.0
1.5
1.5
1.2
1.2
12
1.4
1.4
1.4
1.5
1.7
1.9
1.5
1.3
1.0
1.0
0.6
0.4
0.7
0.7
0.4
0.3
0.0
0.3
0.3
0.1
(0.1)
0.3
0.3
02
0.2
0.2
0.2
0.2
0.0
(0.0)
(0.1)
0.1
(0.0)
(0.3)
(0.8)
(0.6)
(0.6)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
(0.0)
(0.0)
0.1
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.7
0.8
0.9
1.1
1.1
1.1
1.1
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.4
1.4
1.3
13

(3.1)
0.4
1.4
2.5
0.0
0.1
0.3
0.1
(0.2)
(0.4)
(0.4)
(0.0)
(1.4)
(4.1)
(4.8)
(4.6)
(5.0)
(6.1)
(3.5)
(2.1)
(1.7)
(1.4)
(1.3)
(1.1)
(0.6)
(0.3)
(0.4)
0.4
0.5
1.7
1.8
2.5
2.2
2.1
1.6
1.6
1.3
1.3
13
1.5
1.5
1.5
1.5
1.8
2.0
1.5
1.4
1.1
1.1
0.6
0.5
0.7
0.7
0.4
0.3
0.1
0.3
0.3
0.2
(0.0)
0.3
0.3
02
0.2
0.2
0.2
0.2
0.1
(0.0)
(0.1)
0.2
(0.0)
(0.3)
(0.7)
(0.6)
(0.6)
(0.3)
(0.4)
(0.5)
(0.5)
(0.6)
(0.1)
(0.0)
0.0
0.1
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.8
0.8
1.0
1.2
1.1
1.1
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.3
1.4
1.4
1.3
13

4.0
3.8
4.4
0.8
0.8
0.9
0.6
0.2
(0.0)
(0.2)
0.2
(1.3)
(4.1)
(4.9)
(4.7)
(5.1)
(6.2)
(3.5)
(2.0)
(1.7)
(1.4)
(1.2)
(1.1)
(0.5)
(0.2)
(0.2)
0.5
0.6
1.9
2.0
2.7
2.4
2.3
1.7
1.7
1.4
1.4
14
1.6
1.6
1.6
1.7
1.9
2.1
1.6
1.5
1.2
1.2
0.7
0.5
0.8
0.8
0.5
0.3
0.1
0.4
0.4
0.2
0.0
0.3
0.4
02
0.2
0.2
0.2
0.2
0.1
0.0
(0.0)
0.2
0.0
(0.2)
(0.7)
(0.6)
(0.6)
(0.2)
(0.4)
(0.5)
(0.4)
(0.6)
(0.1)
0.0
0.1
0.1
0.2
0.3
0.3
0.3
0.3
0.4
0.6
0.8
0.7
0.8
0.9
1.0
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.2
1.3
1.3
1.3
1.4
1.4
1.3
13

3.6
4.6
(0.2)
(0.0)
0.3
0.0
(0.3)
(0.5)
(0.6)
(0.1)
(1.7)
(4.8)
(5.6)
(5.3)
(5.7)
(6.8)
(3.9)
(2.4)
(2.0)
(1.6)
(1.4)
(1.3)
(0.7)
(0.4)
(0.4)
0.4
0.5
1.8
1.9
2.6
2.4
2.2
1.7
1.6
1.3
1.4
14
1.5
1.6
1.5
1.6
1.9
2.1
1.6
1.4
1.1
1.1
0.6
0.5
0.7
0.7
0.4
0.3
0.1
0.3
0.3
0.2
(0.1)
0.3
0.3
02
0.2
0.2
0.2
0.2
0.0
(0.0)
(0.1)
0.1
(0.0)
(0.3)
(0.8)
(0.6)
(0.6)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
(0.0)
0.0
0.1
0.1
0.3
0.3
0.3
0.2
0.4
0.5
0.8
0.6
0.8
0.8
1.0
1.2
1.1
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.3
1.4
1.4
1.3
13

5.6
(2.0)
(1.2)
(0.5)
(0.6)
(1.0)
(1.1)
(1.1)
(0.5)
(2.2)
(5.5)
(6.3)
(6.0)
(6.3)
(7.5)
(4.4)
(2.7)
(2.2)
(1.9)
(1.7)
(1.5)
(0.9)
(0.6)
(0.6)
0.2
0.4
1.8
1.8
2.6
2.3
2.2
1.6
1.6
1.2
1.3
13
1.5
1.5
1.5
1.5
1.8
2.0
1.5
1.4
1.1
1.1
0.6
0.4
0.7
0.7
0.3
0.2
(0.0)
0.3
0.3
0.1
(0.1)
0.2
0.2
01
0.1
0.1
0.1
0.1
(0.0)
(0.1)
(0.1)
0.1
(0.1)
(0.4)
(0.8)
(0.7)
(0.7)
(0.3)
(0.5)
(0.6)
(0.6)
(0.7)
(0.2)
(0.1)
(0.0)
0.0
0.1
0.2
0.3
0.2
0.2
0.3
0.5
0.8
0.6
0.7
0.8
0.9
1.1
1.1
1.1
1.1
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.3
1.4
1.4
1.3
13

(9.1)
(4.4)
(2.4)
(2.1)
(2.2)
(2.2)
(2.1)
(1.3)
(3.1)
(6.6)
(7.3)
(6.9)
(7.2)
(8.4)
(5.0)
(3.2)
(2.7)
(2.3)
(2.0)
(1.8)
(1.2)
(0.8)
(0.8)
0.0
0.2
1.6
1.7
2.5
2.2
2.1
1.5
1.5
1.1
1.2
12
1.3
1.4
1.4
1.4
1.7
1.9
1.4
1.3
1.0
1.0
0.5
0.3
0.5
0.6
0.2
0.1
(0.1)
0.2
0.2
0.0
(0.2)
0.1
0.2
00
0.0
0.0
0.0
0.0
(0.1)
(0.2)
(0.2)
0.0
(0.2)
(0.4)
(0.9)
(0.8)
(0.8)
(0.4)
(0.6)
(0.7)
(0.6)
(0.8)
(0.3)
(0.1)
(0.1)
(0.0)
0.0
0.2
0.2
0.2
0.1
0.3
0.5
0.7
0.5
0.7
0.7
0.9
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.2
1.2
1.2
1.3
1.3
1.2
12

0.5
1.1
0.3
(0.4)
(0.7)
(0.8)
(0.1)
(2.3)
(6.3)
(7.2)
(6.7)
(7.0)
(8.3)
(4.7)
(2.8)
(2.3)
(1.9)
(1.6)
(1.4)
(0.7)
(0.4)
(0.4)
0.4
0.6
2.1
2.1
2.9
2.6
2.5
1.9
1.8
1.5
1.5
15
1.7
1.7
1.7
1.7
2.0
2.2
1.7
1.6
1.2
1.2
0.7
0.5
0.8
0.8
0.4
0.3
0.1
0.3
0.4
0.2
(0.1)
0.3
0.3
02
0.2
0.2
0.2
0.2
0.1
(0.0)
(0.1)
0.2
(0.0)
(0.3)
(0.8)
(0.7)
(0.7)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
(0.0)
0.0
0.1
0.2
0.3
0.3
0.3
0.3
0.4
0.6
0.8
0.7
0.8
0.9
1.0
1.2
1.1
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.2
1.3
1.3
1.3
1.4
1.4
1.3
13

1.7
0.2
(0.7)
(1.1)
(1.1)
(0.2)
(2.7)
(7.1)
(8.0)
(7.4)
(7.7)
(9.0)
(5.1)
(3.0)
(2.5)
(2.0)
(1.7)
(1.6)
(0.8)
(0.5)
(0.5)
0.4
0.6
2.1
2.2
3.0
2.7
2.5
1.9
1.9
1.5
1.5
15
1.7
1.7
1.7
1.8
2.1
2.3
1.7
1.6
1.2
1.2
0.7
0.5
0.8
0.8
0.4
0.3
0.1
0.3
0.4
0.2
(0.1)
0.3
0.3
02
0.2
0.2
0.2
0.2
0.0
(0.0)
(0.1)
0.2
(0.0)
(0.3)
(0.8)
(0.7)
(0.7)
(0.3)
(0.4)
(0.6)
(0.5)
(0.6)
(0.2)
(0.0)
0.0
0.1
0.2
0.3
0.3
0.3
0.3
0.4
0.6
0.8
0.7
0.8
0.9
1.0
1.2
1.2
1.2
1.2
1.3
1.2
1.3
1.3
1.2
1.2
1.3
1.3
1.3
1.5
1.5
1.3
13

(1.3)
(1.9)
(2.6)
(2.0)
(2.3)
(2.0)
(1.8)
(2.0)
(1.7)
(1.4)
(0.6)
(0.4)
0.3
1.5
(3.4)
(3.8)
(4.1)
(4.8)
(8.3)
(9.4) (10.7) (12.8)
(9.1) (10.2) (11.4) (13.1)
(8.3)
(9.2) (10.1) (11.4)
(8.6)
(9.3) (10.2) (11.3)
(9.9) (10.8) (11.6) (12.7)
(5.6)
(6.0)
(6.4)
(6.8)
(3.4)
(3.6)
(3.7)
(3.8)
(2.7)
(2.9)
(2.9)
(3.0)
(2.3)
(2.3)
(2.3)
(2.3)
(2.0)
(2.0)
(2.0)
(2.0)
(1.7)
(1.8)
(1.7)
(1.7)
(0.9)
(0.9)
(0.8)
(0.7)
(0.6)
(0.5)
(0.4)
(0.3)
(0.6)
(0.6)
(0.4)
(0.4)
0.4
0.5
0.6
0.8
0.5
0.6
0.8
1.0
2.2
2.3
2.6
2.8
2.2
2.4
2.6
2.8
3.1
3.3
3.5
3.8
2.8
2.9
3.2
3.4
2.6
2.7
2.9
3.2
1.9
2.0
2.2
2.4
1.9
2.0
2.1
2.3
1.5
1.6
1.7
1.9
1.5
15
1.6
16
1.8
18
1.9
19
1.7
1.8
1.9
2.1
1.7
1.8
2.0
2.1
1.7
1.8
1.9
2.1
1.8
1.9
2.0
2.1
2.1
2.2
2.3
2.5
2.3
2.4
2.5
2.7
1.7
1.8
1.9
2.1
1.6
1.7
1.8
1.9
1.2
1.3
1.4
1.5
1.2
1.3
1.4
1.5
0.7
0.7
0.8
0.9
0.5
0.5
0.6
0.7
0.8
0.8
0.9
1.0
0.8
0.8
0.9
1.0
0.4
0.4
0.5
0.6
0.3
0.3
0.4
0.4
0.0
0.1
0.1
0.2
0.3
0.4
0.4
0.5
0.3
0.4
0.4
0.5
0.1
0.2
0.2
0.3
(0.1)
(0.1)
(0.0)
0.0
0.3
0.3
0.4
0.4
0.3
0.3
0.4
0.4
02
0.2
02
0.2
02
0.2
03
0.3
0.2
0.2
0.2
0.3
0.2
0.2
0.2
0.3
0.2
0.2
0.2
0.3
0.0
0.0
0.1
0.1
(0.1)
(0.0)
0.0
0.1
(0.1)
(0.1)
(0.1)
(0.0)
0.1
0.2
0.2
0.2
(0.0)
(0.0)
0.0
0.1
(0.3)
(0.3)
(0.3)
(0.3)
(0.9)
(0.9)
(0.8)
(0.8)
(0.7)
(0.7)
(0.7)
(0.7)
(0.7)
(0.7)
(0.7)
(0.7)
(0.3)
(0.3)
(0.3)
(0.3)
(0.5)
(0.5)
(0.4)
(0.4)
(0.6)
(0.6)
(0.6)
(0.6)
(0.6)
(0.5)
(0.5)
(0.5)
(0.7)
(0.7)
(0.6)
(0.6)
(0.2)
(0.2)
(0.1)
(0.1)
(0.0)
(0.0)
0.0
0.0
(0.0)
(0.0)
0.0
0.1
0.0
0.1
0.1
0.1
0.1
0.2
0.2
0.2
0.3
0.3
0.3
0.4
0.3
0.3
0.4
0.4
0.3
0.3
0.3
0.4
0.2
0.3
0.3
0.3
0.4
0.4
0.4
0.5
0.6
0.6
0.6
0.7
0.8
0.9
0.9
0.9
0.6
0.7
0.7
0.7
0.8
0.8
0.9
0.9
0.9
0.9
0.9
1.0
1.0
1.0
1.1
1.1
1.2
1.2
1.3
1.3
1.1
1.2
1.2
1.3
1.2
1.2
1.3
1.3
1.2
1.2
1.3
1.3
1.2
1.3
1.3
1.4
1.2
1.2
1.3
1.3
1.2
1.3
1.3
1.4
1.3
1.3
1.4
1.4
1.2
1.3
1.3
1.3
1.2
1.3
1.3
1.3
1.3
1.4
1.4
1.4
1.3
1.3
1.4
1.4
1.3
1.3
1.4
1.4
1.5
1.5
1.5
1.6
1.5
1.5
1.5
1.6
1.3
13
1.4
14
1.4
14
1.4
14

1899

1900

1901

1902

1903

1904

1905

1906

1907

1908

1909

1913

1914

1915

1916

1917

1918

1919

1920

1921

1922

1923

INVESTMENT FROM END YEAR


1924

1925

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

INVESTMENT FROM END YEAR


1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

INVESTMENT FROM END YEAR


1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2011

2012

HOW TO USE TABLES OF TOTAL RETURNS

1910

1911

1912

The dates along the top (and bottom) are those on which each portfolio
starts; those down the side are the dates to which the annual rate of return
is calculated. Thus the figure at the bottom right hand corner (9.6) shows that the real return on a portfolio bought at the end of December
2012 and held for one year to December 2013 was -9.6%. Figures in
brackets indicate negative returns.
4.5
(6.5)
(16.3)
(15.9)
(13.3)
(12.8)
(14.3)
(7.5)
(4.1)
(3.1)
(2.4)
(2.0)
(1.7)
(0.7)
(0.2)
(0.3)
0.9
1.1
3.0
3.0
4.1
3.6
3.4
2.5
2.5
2.0
2.0
20
2.2
2.2
2.2
2.2
2.6
2.8
2.2
2.0
1.6
1.5
0.9
0.7
1.0
1.0
0.6
0.5
0.2
0.5
0.5
0.3
0.0
0.4
0.5
03
0.3
0.3
0.3
0.3
0.2
0.1
0.0
0.3
0.1
(0.2)
(0.8)
(0.6)
(0.6)
(0.2)
(0.4)
(0.6)
(0.5)
(0.6)
(0.1)
0.1
0.1
0.1
0.2
0.4
0.4
0.4
0.3
0.5
0.7
1.0
0.8
0.9
1.0
1.1
1.4
1.3
1.3
1.3
1.4
1.4
1.4
1.4
1.4
1.4
1.5
1.4
1.5
1.6
1.6
1.5
15

(16.3)
(25.0)
(21.7)
(17.2)
(15.9)
(17.0)
(9.1)
(5.1)
(3.9)
(3.1)
(2.6)
(2.2)
(1.1)
(0.6)
(0.6)
0.7
0.9
2.9
3.0
4.0
3.6
3.3
2.5
2.4
1.9
1.9
19
2.1
2.2
2.1
2.2
2.5
2.8
2.1
1.9
1.5
1.5
0.8
0.6
0.9
1.0
0.5
0.4
0.1
0.4
0.4
0.2
(0.1)
0.4
0.4
02
0.2
0.2
0.2
0.2
0.1
(0.0)
(0.1)
0.2
0.0
(0.3)
(0.9)
(0.7)
(0.7)
(0.3)
(0.5)
(0.6)
(0.6)
(0.7)
(0.1)
(0.0)
0.0
0.1
0.2
0.3
0.4
0.3
0.3
0.5
0.6
0.9
0.7
0.9
0.9
1.1
1.3
1.2
1.3
1.3
1.4
1.3
1.3
1.4
1.3
1.3
1.4
1.4
1.4
1.6
1.6
1.4
14

1913

1914

(32.8)
(24.3) (14.7)
(17.5)
(8.6)
(2.0)
(15.8)
(9.2)
(6.4) (10.5)
(17.2) (12.7) (12.1) (16.7) (22.5)
(7.8)
(1.8)
1.7
3.0
10.5
(3.4)
2.6
6.5
8.7
16.1
(2.3)
3.1
6.4
8.2
13.5
(1.5)
3.3
6.2
7.6
11.7
(1.1)
3.3
5.8
6.9
10.1
(0.8)
3.1
5.3
6.3
8.9
0.3
4.0
6.1
7.1
9.5
0.8
4.2
6.1
7.0
9.1
0.6
3.8
5.5
6.2
8.1
1.9
5.0
6.7
7.5
9.3
2.1
5.0
6.5
7.2
8.8
4.2
7.1
8.7
9.5
11.3
4.1
6.9
8.4
9.1
10.7
5.2
7.9
9.4
10.1
11.7
4.7
7.2
8.5
9.2
10.6
4.3
6.7
7.9
8.5
9.7
3.4
5.6
6.7
7.2
8.2
3.3
5.3
6.4
6.8
7.8
2.7
4.6
5.6
6.0
6.9
2.7
27
4.6
46
5.5
55
5.9
59
6.7
67
2.9
4.7
5.6
5.9
6.7
2.9
4.6
5.5
5.8
6.6
2.8
4.5
5.3
5.6
6.3
2.9
4.5
5.2
5.5
6.2
3.2
4.8
5.5
5.8
6.5
3.4
4.9
5.7
6.0
6.6
2.7
4.2
4.8
5.1
5.7
2.5
3.9
4.5
4.8
5.3
2.1
3.4
4.0
4.2
4.7
2.0
3.3
3.9
4.1
4.6
1.4
2.6
3.1
3.3
3.7
1.1
2.3
2.8
3.0
3.4
1.4
2.6
3.1
3.2
3.7
1.4
2.5
3.1
3.2
3.6
1.0
2.1
2.5
2.7
3.1
0.8
1.8
2.3
2.4
2.8
0.5
1.5
2.0
2.1
2.4
0.8
1.8
2.3
2.4
2.7
0.8
1.8
2.2
2.3
2.7
0.6
1.6
2.0
2.1
2.4
0.3
1.2
1.6
1.7
2.0
0.7
1.6
2.0
2.1
2.4
0.8
1.6
2.0
2.1
2.4
06
0.6
15
1.5
18
1.8
19
1.9
22
2.2
0.6
1.4
1.8
1.9
2.2
0.6
1.4
1.8
1.8
2.1
0.6
1.4
1.7
1.8
2.1
0.4
1.2
1.5
1.6
1.9
0.3
1.1
1.4
1.5
1.7
0.2
1.0
1.3
1.4
1.6
0.5
1.3
1.6
1.7
1.9
0.3
1.0
1.3
1.4
1.6
(0.0)
0.7
1.0
1.0
1.3
(0.6)
0.1
0.4
0.4
0.6
(0.4)
0.2
0.5
0.6
0.8
(0.5)
0.2
0.5
0.5
0.7
(0.0)
0.6
0.9
0.9
1.2
(0.2)
0.5
0.7
0.8
1.0
(0.4)
0.3
0.5
0.6
0.8
(0.3)
0.3
0.6
0.6
0.8
(0.4)
0.2
0.4
0.5
0.7
0.1
0.7
1.0
1.0
1.2
0.3
0.9
1.1
1.2
1.4
0.3
0.9
1.1
1.2
1.4
0.3
0.9
1.2
1.2
1.4
0.4
1.0
1.3
1.3
1.5
0.6
1.2
1.4
1.5
1.6
0.6
1.2
1.4
1.5
1.7
0.6
1.1
1.4
1.4
1.6
0.5
1.1
1.3
1.4
1.5
0.7
1.2
1.5
1.5
1.7
0.9
1.4
1.6
1.7
1.9
1.2
1.7
1.9
2.0
2.2
1.0
1.5
1.7
1.8
1.9
1.1
1.7
1.9
1.9
2.1
1.2
1.7
1.9
2.0
2.1
1.3
1.9
2.1
2.1
2.3
1.6
2.1
2.3
2.4
2.5
1.5
2.0
2.2
2.3
2.4
1.5
2.0
2.3
2.3
2.5
1.5
2.0
2.2
2.3
2.5
1.6
2.1
2.3
2.3
2.5
1.5
2.0
2.2
2.3
2.5
1.6
2.0
2.3
2.3
2.5
1.6
2.1
2.3
2.3
2.5
1.5
2.0
2.2
2.3
2.4
1.5
2.0
2.2
2.3
2.4
1.7
2.1
2.3
2.4
2.5
1.6
2.0
2.2
2.3
2.4
1.6
2.1
2.3
2.3
2.5
1.8
2.2
2.4
2.5
2.6
1.8
2.2
2.4
2.4
2.6
1.6
16
2.1
21
2.3
23
2.3
23
2.5
25
1915

1916

1917

1918

1919

Each
E
h figure
fi
on the
th bottom
b tt
line
li off the
th table
t bl shows
h
the
th average annuall
return up to the end of December 2013 from the year shown below the
figure. The first figure is 1.2, showing that the average annual rate of return
over the whole period since 1899 has been 1.2%.

57.5
42.0
28.8
22.4
18.2
15.3
15.0
13.9
12.1
13.1
12.2
14.7
13.7
14.6
13.2
12.2
10.4
9.8
8.7
8.4
84
8.4
8.1
7.8
7.6
7.9
8.0
6.9
6.5
5.8
5.6
4.7
4.3
4.6
4.5
3.9
3.6
3.2
3.5
3.4
3.1
2.7
3.1
3.1
29
2.9
2.8
2.7
2.7
2.5
2.3
2.2
2.5
2.2
1.8
1.1
1.2
1.2
1.6
1.4
1.2
1.3
1.1
1.7
1.8
1.8
1.8
1.9
2.1
2.1
2.0
1.9
2.1
2.3
2.6
2.3
2.5
2.5
2.7
2.9
2.8
2.8
2.8
2.9
2.8
2.8
2.8
2.8
2.7
2.8
2.8
2.8
2.9
2.9
2.8
28

28.0
16.5
12.5
10.0
8.3
9.1
8.7
7.5
9.0
8.5
11.4
10.7
11.9
10.6
9.6
8.0
7.5
6.5
6.3
63
6.4
6.2
5.9
5.9
6.2
6.3
5.3
5.0
4.3
4.2
3.3
3.0
3.3
3.2
2.6
2.4
2.0
2.3
2.3
2.0
1.6
2.1
2.1
18
1.8
1.8
1.8
1.7
1.5
1.4
1.3
1.6
1.3
0.9
0.3
0.4
0.4
0.8
0.7
0.4
0.5
0.3
0.9
1.1
1.1
1.1
1.2
1.4
1.4
1.4
1.3
1.5
1.6
2.0
1.7
1.9
1.9
2.1
2.3
2.2
2.3
2.3
2.3
2.3
2.3
2.3
2.2
2.2
2.3
2.3
2.3
2.4
2.4
2.3
23

6.0
5.5
4.5
3.8
5.7
5.8
4.8
6.8
6.5
9.9
9.2
10.6
9.3
8.4
6.7
6.3
5.4
5.2
52
5.3
5.2
5.0
5.0
5.3
5.5
4.5
4.2
3.5
3.4
2.5
2.2
2.5
2.5
1.9
1.7
1.3
1.7
1.7
1.4
1.0
1.5
1.5
13
1.3
1.3
1.2
1.2
1.0
0.9
0.8
1.1
0.8
0.4
(0.2)
(0.0)
(0.1)
0.4
0.2
0.0
0.1
(0.1)
0.5
0.7
0.7
0.8
0.9
1.0
1.1
1.0
0.9
1.1
1.3
1.6
1.4
1.6
1.6
1.8
2.0
1.9
2.0
2.0
2.0
2.0
2.0
2.1
2.0
2.0
2.1
2.0
2.0
2.2
2.2
2.0
20

4.9
3.8
3.1
5.6
5.8
4.6
6.9
6.6
10.3
9.6
11.0
9.6
8.6
6.8
6.4
5.3
5.2
52
5.3
5.2
4.9
4.9
5.3
5.5
4.5
4.1
3.4
3.3
2.4
2.1
2.4
2.4
1.8
1.6
1.2
1.6
1.6
1.3
0.9
1.4
1.4
12
1.2
1.1
1.1
1.1
0.9
0.8
0.7
1.0
0.7
0.3
(0.3)
(0.2)
(0.2)
0.3
0.1
(0.1)
(0.0)
(0.2)
0.4
0.6
0.6
0.7
0.8
1.0
1.0
0.9
0.9
1.0
1.2
1.6
1.3
1.5
1.6
1.7
2.0
1.9
1.9
1.9
2.0
1.9
2.0
2.0
1.9
1.9
2.0
2.0
2.0
2.1
2.1
2.0
20

2.7
2.2
5.9
6.0
4.6
7.3
6.8
11.0
10.1
11.7
10.0
8.9
6.9
6.5
5.4
5.2
52
5.3
5.2
4.9
4.9
5.3
5.5
4.4
4.1
3.4
3.3
2.3
2.0
2.3
2.3
1.7
1.5
1.1
1.5
1.5
1.2
0.8
1.3
1.3
11
1.1
1.1
1.0
1.0
0.8
0.7
0.6
0.9
0.7
0.2
(0.4)
(0.3)
(0.3)
0.2
0.0
(0.2)
(0.1)
(0.3)
0.4
0.5
0.5
0.6
0.7
0.9
0.9
0.9
0.8
1.0
1.2
1.5
1.3
1.5
1.5
1.7
1.9
1.8
1.9
1.9
1.9
1.9
1.9
2.0
1.9
1.9
2.0
1.9
2.0
2.1
2.1
2.0
20

1.8
7.5
7.1
5.0
8.2
7.5
12.2
11.1
12.7
10.8
9.5
7.3
6.8
5.5
5.4
54
5.5
5.4
5.0
5.0
5.4
5.7
4.5
4.1
3.4
3.3
2.3
2.0
2.3
2.3
1.7
1.4
1.0
1.4
1.4
1.1
0.7
1.2
1.3
10
1.0
1.0
1.0
1.0
0.8
0.7
0.5
0.9
0.6
0.2
(0.5)
(0.3)
(0.3)
0.2
(0.0)
(0.2)
(0.1)
(0.3)
0.3
0.5
0.5
0.6
0.7
0.9
0.9
0.8
0.8
1.0
1.2
1.5
1.3
1.4
1.5
1.7
1.9
1.8
1.9
1.9
1.9
1.9
1.9
2.0
1.9
1.9
2.0
1.9
1.9
2.1
2.1
2.0
20

13.6
9.9
6.2
9.9
8.7
14.1
12.5
14.2
11.9
10.3
7.8
7.2
5.8
5.6
56
5.7
5.6
5.2
5.2
5.6
5.9
4.6
4.2
3.5
3.4
2.3
2.0
2.4
2.3
1.7
1.4
1.0
1.4
1.4
1.1
0.7
1.2
1.2
10
1.0
1.0
1.0
1.0
0.7
0.6
0.5
0.9
0.6
0.2
(0.5)
(0.4)
(0.4)
0.1
(0.1)
(0.3)
(0.2)
(0.4)
0.3
0.5
0.5
0.6
0.7
0.8
0.9
0.8
0.8
1.0
1.2
1.5
1.3
1.4
1.5
1.7
1.9
1.8
1.9
1.9
1.9
1.9
1.9
2.0
1.9
1.9
2.0
1.9
2.0
2.1
2.1
2.0
20

6.4
2.6
8.7
7.6
14.2
12.3
14.3
11.6
10.0
7.3
6.6
5.2
5.0
50
5.2
5.1
4.7
4.7
5.2
5.5
4.2
3.8
3.0
2.9
1.9
1.5
1.9
2.0
1.3
1.0
0.6
1.1
1.1
0.7
0.3
0.9
0.9
07
0.7
0.7
0.7
0.7
0.5
0.3
0.2
0.6
0.3
(0.1)
(0.8)
(0.6)
(0.6)
(0.1)
(0.3)
(0.5)
(0.4)
(0.6)
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.6
0.6
0.8
1.0
1.3
1.1
1.3
1.3
1.5
1.8
1.7
1.7
1.7
1.8
1.7
1.8
1.8
1.7
1.7
1.9
1.8
1.8
2.0
2.0
1.8
18

(1.0)
9.9
8.0
16.2
13.5
15.6
12.4
10.4
7.4
6.7
5.1
4.9
49
5.1
5.0
4.6
4.6
5.1
5.4
4.1
3.7
2.9
2.8
1.7
1.3
1.8
1.8
1.1
0.8
0.4
0.9
0.9
0.6
0.2
0.7
0.8
06
0.6
0.5
0.5
0.5
0.3
0.2
0.1
0.5
0.2
(0.3)
(1.0)
(0.8)
(0.8)
(0.2)
(0.4)
(0.7)
(0.6)
(0.7)
(0.0)
0.1
0.2
0.3
0.4
0.6
0.6
0.5
0.5
0.7
0.9
1.2
1.0
1.2
1.3
1.4
1.7
1.6
1.7
1.7
1.7
1.7
1.7
1.8
1.7
1.7
1.8
1.7
1.8
1.9
1.9
1.8
18

21.9
12.7
22.6
17.4
19.3
14.8
12.2
8.5
7.5
5.8
5.5
55
5.6
5.4
5.1
5.0
5.5
5.8
4.4
3.9
3.1
3.0
1.8
1.4
1.9
1.9
1.2
0.9
0.5
0.9
0.9
0.6
0.2
0.8
0.8
06
0.6
0.6
0.6
0.6
0.3
0.2
0.1
0.5
0.2
(0.2)
(1.0)
(0.8)
(0.8)
(0.2)
(0.4)
(0.7)
(0.5)
(0.7)
(0.0)
0.2
0.2
0.3
0.4
0.6
0.6
0.6
0.5
0.7
0.9
1.3
1.0
1.2
1.3
1.5
1.7
1.6
1.7
1.7
1.8
1.7
1.7
1.8
1.7
1.7
1.8
1.8
1.8
2.0
2.0
1.8
18

4.3
23.0
16.0
18.6
13.4
10.6
6.7
5.9
4.1
4.0
40
4.3
4.2
3.9
3.9
4.5
4.9
3.5
3.0
2.2
2.1
1.0
0.6
1.1
1.1
0.4
0.2
(0.2)
0.3
0.3
(0.0)
(0.4)
0.2
0.2
00
0.0
0.0
0.0
0.0
(0.2)
(0.3)
(0.4)
0.0
(0.3)
(0.7)
(1.4)
(1.2)
(1.2)
(0.6)
(0.8)
(1.1)
(0.9)
(1.1)
(0.4)
(0.2)
(0.2)
(0.1)
0.0
0.2
0.3
0.2
0.2
0.4
0.6
1.0
0.7
0.9
1.0
1.2
1.5
1.4
1.4
1.4
1.5
1.5
1.5
1.6
1.5
1.5
1.6
1.5
1.6
1.7
1.7
1.6
16

45.0
22.3
23.8
15.9
12.0
7.1
6.1
4.1
3.9
39
4.3
4.2
3.8
3.9
4.6
4.9
3.4
2.9
2.1
2.0
0.8
0.4
1.0
1.0
0.3
0.0
(0.4)
0.1
0.2
(0.2)
(0.6)
0.1
0.1
(0 1)
(0.1)
(0.1)
(0.1)
(0.1)
(0.3)
(0.4)
(0.5)
(0.1)
(0.4)
(0.8)
(1.6)
(1.3)
(1.3)
(0.8)
(0.9)
(1.2)
(1.0)
(1.2)
(0.5)
(0.3)
(0.3)
(0.2)
(0.0)
0.2
0.2
0.2
0.1
0.3
0.6
0.9
0.7
0.9
1.0
1.2
1.4
1.3
1.4
1.4
1.5
1.4
1.5
1.5
1.4
1.4
1.6
1.5
1.5
1.7
1.7
1.6
16

3.2
14.4
7.5
4.9
0.8
0.7
(0.7)
(0 3)
(0.3)
0.5
0.8
0.7
1.0
2.0
2.5
1.1
0.8
(0.0)
0.0
(1.1)
(1.4)
(0.8)
(0.6)
(1.3)
(1.5)
(1.9)
(1.3)
(1.2)
(1.5)
(1.9)
(1.2)
(1.1)
(1 2)
(1.2)
(1.2)
(1.2)
(1.1)
(1.3)
(1.4)
(1.5)
(1.0)
(1.3)
(1.7)
(2.5)
(2.2)
(2.2)
(1.6)
(1.8)
(2.0)
(1.8)
(2.0)
(1.2)
(1.0)
(1.0)
(0.9)
(0.7)
(0.5)
((0.4))
(0.5)
(0.5)
(0.3)
(0.1)
0.3
0.1
0.3
0.4
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.0
0.9
1.0
1.1
1.0
1.1
1.2
1.3
1.1
11

26.9
9.7
5.5
0.2
0.2
(1.4)
(0 8)
(0.8)
0.2
0.5
0.5
0.8
1.9
2.5
0.9
0.6
(0.2)
(0.2)
(1.3)
(1.6)
(1.0)
(0.8)
(1.5)
(1.7)
(2.1)
(1.5)
(1.4)
(1.7)
(2.0)
(1.3)
(1.2)
(1 4)
(1.4)
(1.4)
(1.3)
(1.3)
(1.4)
(1.5)
(1.6)
(1.2)
(1.4)
(1.8)
(2.6)
(2.3)
(2.3)
(1.7)
(1.9)
(2.1)
(1.9)
(2.1)
(1.3)
(1.1)
(1.0)
(0.9)
(0.8)
(0.6)
((0.5))
(0.5)
(0.6)
(0.4)
(0.1)
0.3
0.0
0.3
0.3
0.6
0.9
0.8
0.8
0.8
0.9
0.9
0.9
1.0
0.9
0.9
1.1
1.0
1.0
1.2
1.2
1.1
11

(5.1)
(3.8)
(7.4)
(5.5)
(6.2)
(4 8)
(4.8)
(3.1)
(2.4)
(2.1)
(1.4)
(0.2)
0.7
(0.8)
(1.0)
(1.8)
(1.7)
(2.8)
(3.0)
(2.2)
(2.0)
(2.7)
(2.8)
(3.2)
(2.5)
(2.4)
(2.6)
(3.0)
(2.2)
(2.1)
(2 2)
(2.2)
(2.1)
(2.1)
(2.0)
(2.2)
(2.2)
(2.3)
(1.8)
(2.1)
(2.5)
(3.3)
(3.0)
(2.9)
(2.3)
(2.4)
(2.6)
(2.5)
(2.6)
(1.8)
(1.6)
(1.5)
(1.4)
(1.3)
(1.0)
((1.0))
(1.0)
(1.0)
(0.8)
(0.5)
(0.1)
(0.4)
(0.1)
(0.0)
0.2
0.5
0.4
0.5
0.5
0.6
0.6
0.6
0.7
0.6
0.6
0.7
0.7
0.7
0.9
0.9
0.8
08

(2.4)
(8.6) (14.4)
(5.7)
(7.3)
(6.5)
(7.9)
(4 7)
(4.7)
(5 3)
(5.3)
(2.8)
(2.9)
(2.0)
(1.9)
(1.7)
(1.6)
(1.0)
(0.9)
0.3
0.7
1.2
1.6
(0.4)
(0.3)
(0.7)
(0.6)
(1.6)
(1.5)
(1.4)
(1.4)
(2.7)
(2.7)
(2.9)
(2.9)
(2.1)
(2.1)
(1.9)
(1.8)
(2.6)
(2.6)
(2.7)
(2.8)
(3.1)
(3.1)
(2.4)
(2.4)
(2.2)
(2.2)
(2.5)
(2.5)
(2.9)
(2.9)
(2.1)
(2.1)
(1.9)
(1.9)
(2 1)
(2.1)
(2 1)
(2.1)
(2.0)
(2.0)
(2.0)
(2.0)
(1.9)
(1.9)
(2.1)
(2.1)
(2.2)
(2.1)
(2.2)
(2.2)
(1.7)
(1.7)
(2.0)
(2.0)
(2.4)
(2.4)
(3.2)
(3.2)
(2.9)
(2.9)
(2.9)
(2.9)
(2.2)
(2.2)
(2.4)
(2.4)
(2.6)
(2.6)
(2.4)
(2.4)
(2.6)
(2.6)
(1.8)
(1.8)
(1.5)
(1.5)
(1.5)
(1.4)
(1.3)
(1.3)
(1.2)
(1.2)
(0.9)
(0.9)
((0.9))
((0.9))
(0.9)
(0.9)
(0.9)
(0.9)
(0.7)
(0.7)
(0.4)
(0.4)
(0.0)
0.0
(0.3)
(0.2)
(0.0)
0.0
0.0
0.1
0.3
0.3
0.6
0.6
0.5
0.5
0.6
0.6
0.6
0.6
0.7
0.7
0.6
0.7
0.7
0.7
0.8
0.8
0.7
0.7
0.7
0.7
0.8
0.9
0.8
0.8
0.8
0.9
1.0
1.1
1.0
1.1
0.9
09
0.9
09

0.4
(4.4)
(2 1)
(2.1)
0.2
0.8
0.7
1.2
2.7
3.5
1.3
0.8
(0.4)
(0.3)
(1.8)
(2.1)
(1.2)
(1.1)
(1.9)
(2.1)
(2.5)
(1.8)
(1.6)
(2.0)
(2.4)
(1.5)
(1.4)
(1 6)
(1.6)
(1.6)
(1.5)
(1.4)
(1.7)
(1.7)
(1.8)
(1.3)
(1.6)
(2.1)
(2.9)
(2.6)
(2.6)
(1.9)
(2.1)
(2.3)
(2.1)
(2.3)
(1.5)
(1.2)
(1.2)
(1.0)
(0.9)
(0.6)
((0.6))
(0.6)
(0.6)
(0.4)
(0.1)
0.3
0.0
0.3
0.4
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.0
1.0
1.0
1.1
1.0
1.1
1.3
1.3
1.1
11

1920

1921

1922

1923

1924

1925

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

1937

INVESTMENT FROM END YEAR

The top figure in each column is the rate of return in the first year, so that
reading diagonally down the table gives the real rate of return in each year
since 1899. The table can be used to see the rate of return over any period;
thus a purchase made at the end of 1900 would have lost 1.0% of its value
in one year (allowing for reinvestment of income) but, over the first five
years (up to the end of 1905), would have given an average annual real
return of 0.4%.

1936

(9.0)
(3 3)
(3.3)
0.1
0.9
0.7
1.4
3.0
3.9
1.4
0.8
(0.4)
(0.3)
(1.9)
(2.3)
(1.4)
(1.1)
(2.0)
(2.2)
(2.7)
(1.9)
(1.7)
(2.1)
(2.5)
(1.6)
(1.5)
(1 7)
(1.7)
(1.6)
(1.6)
(1.5)
(1.7)
(1.8)
(1.9)
(1.4)
(1.6)
(2.1)
(3.0)
(2.7)
(2.6)
(1.9)
(2.1)
(2.4)
(2.2)
(2.4)
(1.5)
(1.3)
(1.2)
(1.1)
(0.9)
(0.6)
((0.6))
(0.6)
(0.7)
(0.4)
(0.1)
0.3
0.0
0.3
0.4
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.1
1.0
1.0
1.1
1.1
1.1
1.3
1.3
1.1
11

29
2.9
5.0
4.4
3.3
3.6
5.2
5.9
2.7
2.0
0.5
0.5
(1.3)
(1.8)
(0.8)
(0.6)
(1.6)
(1.8)
(2.3)
(1.5)
(1.4)
(1.7)
(2.2)
(1.3)
(1.2)
(1 4)
(1.4)
(1.3)
(1.3)
(1.2)
(1.5)
(1.6)
(1.6)
(1.1)
(1.4)
(1.9)
(2.8)
(2.5)
(2.5)
(1.7)
(1.9)
(2.2)
(2.0)
(2.2)
(1.3)
(1.1)
(1.0)
(0.9)
(0.7)
(0.5)
((0.4))
(0.4)
(0.5)
(0.2)
0.0
0.5
0.2
0.4
0.5
0.8
1.1
1.0
1.1
1.1
1.1
1.1
1.1
1.2
1.1
1.1
1.3
1.2
1.3
1.4
1.4
1.3
13

7.3
5.2
3.5
3.8
5.7
6.4
2.7
1.9
0.2
0.3
(1.7)
(2.1)
(1.1)
(0.8)
(1.9)
(2.1)
(2.6)
(1.7)
(1.6)
(2.0)
(2.5)
(1.5)
(1.3)
(1 6)
(1.6)
(1.5)
(1.4)
(1.4)
(1.6)
(1.7)
(1.8)
(1.2)
(1.5)
(2.1)
(3.0)
(2.6)
(2.6)
(1.9)
(2.1)
(2.3)
(2.1)
(2.3)
(1.4)
(1.2)
(1.1)
(1.0)
(0.8)
(0.5)
((0.5))
(0.5)
(0.6)
(0.3)
(0.0)
0.4
0.1
0.4
0.5
0.7
1.1
0.9
1.0
1.0
1.1
1.1
1.1
1.2
1.1
1.1
1.3
1.2
1.2
1.4
1.4
1.3
13

3.2
1.6
2.6
5.3
6.2
2.0
1.1
(0.6)
(0.5)
(2.6)
(2.9)
(1.7)
(1.4)
(2.5)
(2.7)
(3.2)
(2.2)
(2.1)
(2.4)
(2.9)
(1.9)
(1.7)
(1 9)
(1.9)
(1.9)
(1.8)
(1.7)
(1.9)
(2.0)
(2.1)
(1.5)
(1.8)
(2.3)
(3.3)
(2.9)
(2.9)
(2.1)
(2.3)
(2.6)
(2.4)
(2.5)
(1.6)
(1.4)
(1.3)
(1.1)
(1.0)
(0.7)
((0.6))
(0.7)
(0.7)
(0.4)
(0.2)
0.3
0.0
0.3
0.4
0.6
1.0
0.8
0.9
0.9
1.0
1.0
1.0
1.1
1.0
1.0
1.2
1.1
1.1
1.3
1.3
1.2
12

0.1
2.3
6.0
7.0
1.7
0.7
(1.2)
(0.9)
(3.2)
(3.5)
(2.2)
(1.8)
(2.9)
(3.1)
(3.6)
(2.6)
(2.4)
(2.7)
(3.2)
(2.1)
(1.9)
(2 2)
(2.2)
(2.1)
(2.0)
(1.9)
(2.1)
(2.2)
(2.3)
(1.7)
(2.0)
(2.5)
(3.5)
(3.1)
(3.1)
(2.3)
(2.5)
(2.7)
(2.5)
(2.7)
(1.7)
(1.5)
(1.4)
(1.2)
(1.1)
(0.8)
((0.7))
(0.7)
(0.8)
(0.5)
(0.2)
0.2
(0.0)
0.2
0.3
0.6
0.9
0.8
0.9
0.9
1.0
0.9
1.0
1.1
1.0
1.0
1.1
1.1
1.1
1.3
1.3
1.2
12

4.6
9.1
9.4
2.1
0.9
(1.4)
(1.1)
(3.6)
(3.9)
(2.4)
(2.0)
(3.1)
(3.4)
(3.9)
(2.7)
(2.5)
(2.9)
(3.4)
(2.2)
(2.0)
(2 3)
(2.3)
(2.2)
(2.1)
(2.0)
(2.2)
(2.3)
(2.3)
(1.7)
(2.0)
(2.6)
(3.6)
(3.2)
(3.1)
(2.3)
(2.5)
(2.8)
(2.6)
(2.8)
(1.8)
(1.5)
(1.4)
(1.3)
(1.1)
(0.8)
((0.7))
(0.8)
(0.8)
(0.5)
(0.2)
0.3
(0.0)
0.2
0.3
0.6
0.9
0.8
0.9
0.9
1.0
1.0
1.0
1.1
1.0
1.0
1.2
1.1
1.1
1.3
1.3
1.2
12

13.7
11.9
1.3
(0.0)
(2.5)
(2.0)
(4.7)
(4.9)
(3.1)
(2.6)
(3.8)
(4.0)
(4.5)
(3.2)
(3.0)
(3.3)
(3.9)
(2.6)
(2.4)
(2 6)
(2.6)
(2.5)
(2.3)
(2.2)
(2.5)
(2.6)
(2.6)
(1.9)
(2.3)
(2.8)
(3.9)
(3.4)
(3.4)
(2.5)
(2.7)
(3.0)
(2.8)
(3.0)
(1.9)
(1.7)
(1.6)
(1.4)
(1.2)
(0.9)
((0.8))
(0.9)
(0.9)
(0.6)
(0.3)
0.2
(0.1)
0.1
0.2
0.5
0.9
0.7
0.8
0.8
0.9
0.9
0.9
1.0
0.9
0.9
1.1
1.0
1.1
1.3
1.3
1.1
11

10.2
(4.3) (16.9)
(4.2) (10.7)
(6.2) (11.1)
(4.9)
(8.3)
(7.4) (10.6)
(7.3) (10.0)
(5.0)
(7.0)
(4.3)
(5.9)
(5.4)
(7.0)
(5.5)
(6.9)
(5.9)
(7.2)
(4.4)
(5.6)
(4.1)
(5.1)
(4.4)
(5.3)
(4.9)
(5.8)
(3.5)
(4.3)
(3.2)
(3.9)
(3 4)
(3.4)
(4 1)
(4.1)
(3.2)
(3.9)
(3.1)
(3.7)
(2.9)
(3.5)
(3.1)
(3.7)
(3.2)
(3.7)
(3.2)
(3.7)
(2.5)
(3.0)
(2.8)
(3.3)
(3.4)
(3.9)
(4.4)
(4.9)
(4.0)
(4.4)
(3.9)
(4.3)
(3.0)
(3.4)
(3.2)
(3.6)
(3.4)
(3.8)
(3.2)
(3.6)
(3.4)
(3.7)
(2.3)
(2.7)
(2.0)
(2.3)
(1.9)
(2.2)
(1.8)
(2.0)
(1.6)
(1.8)
(1.2)
(1.5)
((1.2))
((1.4))
(1.2)
(1.4)
(1.2)
(1.5)
(0.9)
(1.2)
(0.6)
(0.8)
(0.1)
(0.3)
(0.4)
(0.6)
(0.1)
(0.3)
(0.0)
(0.2)
0.3
0.1
0.6
0.5
0.5
0.3
0.6
0.4
0.6
0.5
0.7
0.6
0.7
0.5
0.7
0.6
0.8
0.7
0.7
0.6
0.7
0.6
0.9
0.8
0.8
0.7
0.9
0.8
1.1
1.0
1.1
1.0
0.9
09
0.8
08

(4.0)
(8.1) (12.0)
(5.2)
(5.8)
(9.0) (10.6)
(8.5)
(9.6)
(5.3)
(5.5)
(4.3)
(4.3)
(5.7)
(5.9)
(5.7)
(5.9)
(6.2)
(6.4)
(4.4)
(4.5)
(4.0)
(4.0)
(4.4)
(4.4)
(4.9)
(5.0)
(3.4)
(3.3)
(3.1)
(3.0)
(3 3)
(3.3)
(3 2)
(3.2)
(3.1)
(3.0)
(2.9)
(2.9)
(2.8)
(2.7)
(3.0)
(3.0)
(3.1)
(3.0)
(3.1)
(3.1)
(2.4)
(2.3)
(2.7)
(2.6)
(3.3)
(3.3)
(4.4)
(4.4)
(3.9)
(3.9)
(3.9)
(3.8)
(2.9)
(2.9)
(3.1)
(3.1)
(3.4)
(3.4)
(3.1)
(3.1)
(3.3)
(3.3)
(2.2)
(2.2)
(1.9)
(1.8)
(1.8)
(1.7)
(1.6)
(1.6)
(1.4)
(1.3)
(1.1)
(1.0)
((1.0))
((0.9))
(1.0)
(0.9)
(1.1)
(1.0)
(0.8)
(0.7)
(0.4)
(0.3)
0.1
0.2
(0.2)
(0.1)
0.1
0.2
0.2
0.3
0.5
0.5
0.8
0.9
0.7
0.8
0.8
0.9
0.8
0.9
0.9
1.0
0.9
1.0
0.9
1.0
1.0
1.1
0.9
1.0
0.9
1.0
1.1
1.2
1.0
1.1
1.1
1.2
1.3
1.4
1.3
1.4
1.1
11
1.2
12

0.8
(9.8) (19.3)
(8.8) (13.3)
(3.8)
(5.3)
(2.7)
(3.5)
(4.9)
(6.0)
(5.0)
(6.0)
(5.7)
(6.6)
(3.6)
(4.2)
(3.2)
(3.6)
(3.7)
(4.1)
(4.4)
(4.9)
(2.6)
(2.9)
(2.3)
(2.5)
(2 6)
(2.6)
(2 8)
(2.8)
(2.5)
(2.7)
(2.3)
(2.5)
(2.2)
(2.3)
(2.5)
(2.6)
(2.6)
(2.7)
(2.6)
(2.8)
(1.8)
(1.9)
(2.2)
(2.4)
(2.9)
(3.1)
(4.1)
(4.3)
(3.6)
(3.8)
(3.5)
(3.7)
(2.5)
(2.6)
(2.8)
(2.9)
(3.1)
(3.2)
(2.8)
(2.9)
(3.0)
(3.1)
(1.9)
(1.9)
(1.5)
(1.6)
(1.4)
(1.5)
(1.2)
(1.3)
(1.0)
(1.1)
(0.7)
(0.7)
((0.6))
((0.7))
(0.7)
(0.7)
(0.7)
(0.8)
(0.4)
(0.4)
(0.1)
(0.1)
0.5
0.5
0.1
0.1
0.4
0.4
0.5
0.5
0.8
0.8
1.2
1.2
1.1
1.1
1.2
1.2
1.2
1.2
1.3
1.3
1.2
1.2
1.3
1.3
1.3
1.4
1.2
1.3
1.2
1.3
1.4
1.4
1.3
1.3
1.4
1.4
1.6
1.6
1.6
1.6
1.4
14
1.4
14

(6.7)
2.6
2.4
(2.3)
(3.0)
(4.3)
(1.8)
(1.4)
(2.3)
(3.3)
(1.2)
(1.0)
(1 5)
(1.5)
(1.4)
(1.2)
(1.2)
(1.6)
(1.7)
(1.8)
(1.0)
(1.5)
(2.3)
(3.6)
(3.1)
(3.0)
(1.9)
(2.2)
(2.6)
(2.3)
(2.5)
(1.3)
(1.0)
(0.9)
(0.7)
(0.5)
(0.2)
((0.1))
(0.1)
(0.2)
0.1
0.4
1.0
0.6
0.9
1.0
1.3
1.7
1.6
1.7
1.6
1.7
1.7
1.7
1.8
1.7
1.7
1.8
1.7
1.8
2.0
2.0
1.8
18

12.8
7.3
(0.7)
(2.1)
(3.8)
(0.9)
(0.7)
(1.7)
(2.9)
(0.7)
(0.5)
(1 0)
(1.0)
(0.9)
(0.8)
(0.8)
(1.2)
(1.4)
(1.6)
(0.7)
(1.2)
(2.0)
(3.5)
(2.9)
(2.8)
(1.7)
(2.0)
(2.4)
(2.1)
(2.4)
(1.1)
(0.8)
(0.7)
(0.5)
(0.3)
0.0
0.1
0.0
(0.1)
0.3
0.6
1.2
0.8
1.1
1.2
1.5
1.9
1.7
1.8
1.8
1.9
1.8
1.9
2.0
1.8
1.8
2.0
1.9
1.9
2.2
2.2
1.9
19

2.0
(6.9) (15.0)
(6.6) (10.6)
(7.6) (10.6)
(3.5)
(4.8)
(2.7)
(3.7)
(3.6)
(4.5)
(4.7)
(5.6)
(2.1)
(2.6)
(1.7)
(2.1)
(2 2)
(2.2)
(2 6)
(2.6)
(2.0)
(2.4)
(1.8)
(2.1)
(1.7)
(1.9)
(2.1)
(2.4)
(2.2)
(2.5)
(2.3)
(2.6)
(1.4)
(1.6)
(1.9)
(2.1)
(2.7)
(3.0)
(4.2)
(4.5)
(3.6)
(3.8)
(3.5)
(3.7)
(2.3)
(2.5)
(2.6)
(2.8)
(2.9)
(3.1)
(2.7)
(2.8)
(2.9)
(3.1)
(1.6)
(1.7)
(1.2)
(1.3)
(1.1)
(1.2)
(0.9)
(1.0)
(0.7)
(0.8)
(0.3)
(0.4)
((0.3))
((0.3))
(0.3)
(0.4)
(0.4)
(0.4)
(0.0)
(0.1)
0.3
0.3
0.9
0.9
0.5
0.5
0.9
0.8
1.0
0.9
1.3
1.2
1.7
1.7
1.5
1.5
1.6
1.6
1.6
1.6
1.7
1.7
1.6
1.6
1.7
1.7
1.8
1.8
1.6
1.6
1.6
1.6
1.8
1.8
1.7
1.7
1.8
1.8
2.0
2.0
2.0
2.0
1.8
18
1.8
18

(6.0)
(8.2) (10.4)
(1.1)
1.5
(0.6)
1.3
(2.3)
(1.3)
(3.9)
(3.5)
(0.7)
0.3
(0.4)
0.5
(1 1)
(1.1)
(0 4)
(0.4)
(1.0)
(0.4)
(0.9)
(0.3)
(0.8)
(0.3)
(1.3)
(0.9)
(1.5)
(1.2)
(1.7)
(1.4)
(0.6)
(0.3)
(1.3)
(1.0)
(2.3)
(2.0)
(3.9)
(3.8)
(3.2)
(3.1)
(3.1)
(3.0)
(1.9)
(1.7)
(2.2)
(2.0)
(2.6)
(2.5)
(2.3)
(2.2)
(2.6)
(2.4)
(1.2)
(1.0)
(0.8)
(0.6)
(0.7)
(0.5)
(0.5)
(0.3)
(0.3)
(0.1)
0.1
0.3
0.2
0.4
0.1
0.3
0.0
0.2
0.4
0.6
0.7
0.9
1.3
1.6
0.9
1.1
1.3
1.5
1.4
1.5
1.7
1.9
2.1
2.3
1.9
2.1
2.0
2.2
2.0
2.2
2.1
2.3
2.0
2.2
2.0
2.2
2.1
2.3
2.0
2.2
2.0
2.1
2.1
2.3
2.0
2.2
2.1
2.2
2.3
2.5
2.3
2.5
2.1
21
2.2
22

14.9
7.7
1.9
(1.7)
2.5
2.4
11
1.1
0.9
0.9
0.8
(0.0)
(0.4)
(0.7)
0.5
(0.3)
(1.5)
(3.3)
(2.7)
(2.6)
(1.2)
(1.6)
(2.1)
(1.8)
(2.1)
(0.6)
(0.2)
(0.1)
0.1
0.3
0.7
0.7
0.7
0.5
0.9
1.3
1.9
1.4
1.8
1.9
2.2
2.6
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
2.7
2.7
2.5
25

0.9
(4.0)
(8.7)
(6.7) (10.3) (11.9)
(0.3)
(0.7)
3.5
0.1
(0.1)
2.9
(1 1)
(1.1)
(1 5)
(1.5)
04
0.4
(0.9)
(1.3)
0.3
(0.8)
(1.0)
0.3
(0.7)
(0.9)
0.3
(1.4)
(1.7)
(0.8)
(1.7)
(1.9)
(1.1)
(1.9)
(2.1)
(1.4)
(0.5)
(0.7)
0.1
(1.3)
(1.5)
(0.9)
(2.5)
(2.7)
(2.3)
(4.4)
(4.7)
(4.4)
(3.6)
(3.9)
(3.6)
(3.5)
(3.7)
(3.4)
(2.0)
(2.2)
(1.8)
(2.4)
(2.6)
(2.2)
(2.8)
(3.0)
(2.7)
(2.5)
(2.6)
(2.3)
(2.8)
(2.9)
(2.7)
(1.2)
(1.3)
(0.9)
(0.8)
(0.8)
(0.5)
(0.6)
(0.7)
(0.4)
(0.4)
(0.5)
(0.2)
(0.2)
(0.2)
0.1
0.2
0.2
0.5
0.3
0.3
0.6
0.2
0.2
0.5
0.1
0.1
0.4
0.5
0.5
0.8
0.9
0.9
1.2
1.6
1.6
1.9
1.1
1.1
1.4
1.5
1.5
1.8
1.6
1.6
1.9
1.9
1.9
2.2
2.3
2.4
2.7
2.1
2.2
2.5
2.2
2.3
2.6
2.2
2.2
2.5
2.3
2.3
2.6
2.2
2.2
2.5
2.2
2.3
2.5
2.3
2.4
2.6
2.2
2.2
2.5
2.2
2.2
2.4
2.3
2.4
2.6
2.2
2.3
2.5
2.3
2.3
2.5
2.5
2.5
2.8
2.5
2.5
2.8
2.3
23
2.3
23
2.5
25

1938

1939

1940

1941

1942

1943

1944

1945

1947

1949

1951

1952

1953

1955

1957

1958

INVESTMENT FROM END YEAR

1946

1948

1950

1954

1956

1959

1960

21.5
11.2
49
4.9
3.6
3.0
2.5
0.9
0.3
(0.2)
1.4
0.2
(1.4)
(3.8)
(2.9)
(2.8)
(1.1)
(1.6)
(2.2)
(1.8)
(2.2)
(0.4)
0.1
0.2
0.4
0.6
1.0
1.1
1.0
0.8
1.2
1.7
2.4
1.8
2.2
2.3
2.6
3.1
2.9
3.0
2.9
3.0
2.9
2.9
3.0
2.8
2.8
3.0
2.8
2.9
3.1
3.1
2.8
28

1.8
(2.6)
(2
6)
(1.8)
(1.2)
(0.9)
(2.1)
(2.4)
(2.6)
(0.6)
(1.7)
(3.3)
(5.7)
(4.6)
(4.4)
(2.4)
(2.9)
(3.4)
(2.9)
(3.3)
(1.4)
(0.8)
(0.7)
(0.5)
(0.2)
0.3
0.4
0.3
0.2
0.6
1.1
1.8
1.3
1.7
1.8
2.1
2.6
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
2.8
2.7
2.5
25

(6.7)
(6
7)
(3.5)
(2.2)
(1.6)
(2.9)
(3.1)
(3.2)
(0.9)
(2.1)
(3.7)
(6.4)
(5.1)
(4.8)
(2.7)
(3.2)
(3.7)
(3.2)
(3.6)
(1.5)
(1.0)
(0.8)
(0.6)
(0.3)
0.2
0.3
0.2
0.1
0.6
1.0
1.8
1.3
1.7
1.8
2.1
2.7
2.4
2.5
2.5
2.6
2.5
2.5
2.6
2.4
2.4
2.6
2.5
2.5
2.8
2.7
2.5
25

(0.1)
0.2
0.2
(1.9)
(2.4)
(2.6)
(0.1)
(1.5)
(3.4)
(6.3)
(5.0)
(4.7)
(2.4)
(2.9)
(3.5)
(3.0)
(3.4)
(1.2)
(0.7)
(0.5)
(0.3)
0.1
0.6
0.6
0.5
0.4
0.8
1.3
2.1
1.5
2.0
2.1
2.4
2.9
2.7
2.8
2.7
2.8
2.7
2.8
2.8
2.7
2.6
2.8
2.7
2.7
3.0
3.0
2.7
27

0.5
0.3
(2.5)
(2.9)
(3.1)
(0.1)
(1.7)
(3.8)
(7.0)
(5.4)
(5.1)
(2.6)
(3.1)
(3.7)
(3.2)
(3.6)
(1.3)
(0.7)
(0.5)
(0.3)
0.1
0.6
0.7
0.6
0.4
0.9
1.4
2.2
1.6
2.0
2.1
2.5
3.0
2.8
2.9
2.8
2.9
2.8
2.8
2.9
2.7
2.7
2.9
2.7
2.8
3.1
3.0
2.7
27

0.1
(4.0)
(4.0)
(4.0)
(0.2)
(2.0)
(4.4)
(7.9)
(6.1)
(5.6)
(2.9)
(3.4)
(4.1)
(3.4)
(3.8)
(1.4)
(0.8)
(0.6)
(0.3)
0.0
0.6
0.7
0.6
0.4
0.9
1.4
2.3
1.6
2.1
2.2
2.6
3.1
2.9
3.0
2.9
3.0
2.9
2.9
3.0
2.8
2.7
2.9
2.8
2.8
3.1
3.1
2.8
28

(7.8)
(6.1)
(5.4)
(0.3)
(2.4)
(5.1)
(9.0)
(6.8)
(6.2)
(3.2)
(3.8)
(4.4)
(3.7)
(4.1)
(1.5)
(0.8)
(0.6)
(0.3)
0.0
0.6
0.7
0.6
0.4
0.9
1.5
2.3
1.7
2.1
2.2
2.7
3.2
2.9
3.0
3.0
3.1
3.0
3.0
3.0
2.9
2.8
3.0
2.9
2.9
3.2
3.1
2.8
28

(4.2)
(4.1)
(4.0)
2.4
5.9
16.8
(1.0)
0.0
2.1 (10.7)
(4.6)
(4.7)
(4.9) (14.2) (17.6)
(9.1) (10.1) (11.6) (19.4) (23.4) (28.8)
(6.7)
(7.1)
(7.7) (13.0) (13.7) (11.7)
(6.0)
(6.3)
(6.6) (10.7) (10.7)
(8.3)
(2.6)
(2.4)
(2.2)
(5.1)
(3.9)
(0.1)
(3.3)
(3.2)
(3.1)
(5.7)
(4.8)
(2.1)
(4.1)
(4.1)
(4.1)
(6.4)
(5.8)
(3.6)
(3.4)
(3.3)
(3.2)
(5.2)
(4.5)
(2.5)
(3.8)
(3.8)
(3.8)
(5.6)
(5.0)
(3.3)
(1.0)
(0.8)
(0.5)
(1.9)
(1.0)
1.0
(0.3)
(0.0)
0.3
(1.0)
(0.1)
1.9
(0.2)
0.1
0.4
(0.8)
0.1
1.9
0.1
0.4
0.7
(0.4)
0.5
2.2
0.5
0.8
1.1
0.1
0.9
2.5
1.1
1.4
1.7
0.8
1.6
3.2
1.1
1.4
1.7
0.9
1.7
3.1
1.0
1.3
1.6
0.8
1.5
2.8
0.8
1.0
1.3
0.6
1.2
2.5
1.3
1.6
1.9
1.2
1.8
3.1
1.9
2.2
2.5
1.8
2.5
3.7
2.8
3.1
3.4
2.8
3.5
4.7
2.1
2.3
2.6
2.0
2.7
3.7
2.5
2.8
3.1
2.6
3.2
4.2
2.6
2.9
3.2
2.7
3.3
4.3
3.0
3.3
3.6
3.1
3.7
4.7
3.6
3.9
4.2
3.7
4.3
5.3
3.3
3.6
3.8
3.4
4.0
4.9
3.4
3.7
3.9
3.5
4.1
5.0
3.3
3.6
3.8
3.4
3.9
4.8
3.4
3.7
3.9
3.5
4.0
4.9
3.3
3.5
3.7
3.4
3.8
4.7
3.3
3.5
3.7
3.4
3.8
4.6
3.4
3.6
3.8
3.4
3.9
4.7
3.1
3.4
3.6
3.2
3.7
4.4
3.1
3.3
3.5
3.2
3.6
4.3
3.3
3.5
3.7
3.4
3.8
4.5
3.1
3.3
3.5
3.2
3.6
4.3
3.2
3.4
3.6
3.2
3.6
4.3
3.4
3.6
3.8
3.5
3.9
4.6
3.4
3.6
3.8
3.5
3.9
4.5
3.1
31
3.3
33
3.4
34
3.1
31
3.5
35
4.1
41

1961

1962

1963

1964

1965

1966

1967

1968

INVESTMENT FROM END YEAR

1969

1970

1971

1972

1973

9.5
4.1
11.8
6.1
2.4
2.8
1.0
5.5
6.0
5.6
5.6
5.7
6.2
5.9
5.4
4.8
5.3
5.9
6.8
5.7
6.1
6.1
6.5
7.1
6.6
6.5
6.3
6.3
6.1
6.0
6.0
5.6
5.5
5.7
5.4
5.4
5.7
5.5
5.1
51

(1.1)
13.0
5.0
0.7
1.5
(0.4)
5.0
5.6
5.2
5.2
5.3
5.9
5.6
5.1
4.5
5.1
5.6
6.7
5.5
6.0
5.9
6.3
7.0
6.4
6.4
6.2
6.2
5.9
5.9
5.9
5.5
5.4
5.6
5.3
5.3
5.5
5.4
5.0
50

29.1
8.1
(9.4)
1.3 (10.3) (11.2)
2.2
(5.5)
(3.4)
(0.2)
(6.4)
(5.4)
6.0
1.9
5.0
6.6
3.2
6.0
6.0
3.1
5.3
5.9
3.3
5.3
6.0
3.7
5.5
6.6
4.5
6.2
6.2
4.3
5.8
5.6
3.8
5.1
4.9
3.3
4.4
5.5
4.0
5.1
6.1
4.7
5.8
7.2
5.9
7.1
5.9
4.7
5.6
6.4
5.2
6.2
6.3
5.2
6.1
6.7
5.7
6.6
7.4
6.4
7.3
6.8
5.9
6.6
6.7
5.9
6.6
6.5
5.6
6.4
6.5
5.7
6.4
6.2
5.4
6.1
6.1
5.3
6.0
6.1
5.4
6.0
5.7
5.0
5.6
5.6
4.9
5.4
5.8
5.1
5.6
5.5
4.8
5.3
5.5
4.8
5.3
5.7
5.1
5.6
5.6
5.0
5.5
5.2
52
4.6
46
5.0
50

5.0
(2.3)
11.1
10.8
9.0
8.3
8.1
8.6
7.9
6.9
5.9
6.6
7.2
8.5
6.8
7.4
7.2
7.7
8.3
7.6
7.6
7.2
7.2
6.8
6.7
6.7
6.3
6.1
6.3
5.9
5.9
6.2
6.0
5.5
55

(9.2)
14.2
12.8
10.0
9.0
8.7
9.1
8.3
7.1
6.0
6.7
7.4
8.8
7.0
7.5
7.4
7.8
8.5
7.8
7.7
7.3
7.3
6.9
6.8
6.7
6.3
6.1
6.3
6.0
5.9
6.2
6.1
5.6
56

43.6
25.7
17.3
14.1
12.6
12.5
11.0
9.4
7.9
8.4
9.1
10.4
8.3
8.8
8.6
9.0
9.7
8.8
8.6
8.2
8.2
7.7
7.5
7.5
7.0
6.7
6.9
6.5
6.5
6.8
6.6
6.0
60

10.0
6.0
5.7
6.0
7.2
6.4
5.2
4.1
5.1
6.1
7.8
5.8
6.5
6.4
7.0
7.8
7.0
7.0
6.6
6.6
6.3
6.1
6.1
5.7
5.5
5.7
5.4
5.3
5.7
5.5
5.0
50

1974

1975

1976

1979

1980

1981

1982

1977

1978

2.1
3.6
4.7
6.5
5.7
4.4
3.3
4.5
5.7
7.6
5.4
6.2
6.1
6.8
7.7
6.8
6.8
6.5
6.5
6.1
5.9
6.0
5.5
5.3
5.5
5.2
5.2
5.5
5.4
4.9
49

5.0
6.0
8.0
6.6
4.9
3.4
4.9
6.1
8.2
5.8
6.6
6.5
7.1
8.1
7.2
7.1
6.7
6.7
6.3
6.1
6.1
5.6
5.4
5.7
5.3
5.3
5.7
5.5
4.9
49

7.0
9.5
7.1
4.8
3.1
4.8
6.3
8.6
5.9
6.8
6.6
7.3
8.4
7.3
7.2
6.8
6.8
6.3
6.2
6.2
5.7
5.5
5.7
5.3
5.3
5.7
5.5
4.9
49

12.1
7.2
4.2
2.2
4.4
6.2
8.9
5.7
6.7
6.6
7.3
8.5
7.4
7.3
6.8
6.8
6.3
6.2
6.2
5.6
5.4
5.7
5.3
5.2
5.6
5.5
4.9
49

2.4
0.4
(0.9)
2.6
5.0
8.3
4.8
6.1
6.0
6.9
8.1
7.0
6.9
6.4
6.5
6.0
5.8
5.8
5.3
5.1
5.4
5.0
4.9
5.4
5.2
4.6
46

(1.7)
(2.5)
2.6
5.7
9.5
5.2
6.6
6.4
7.4
8.7
7.4
7.3
6.8
6.7
6.2
6.0
6.0
5.4
5.2
5.5
5.1
5.1
5.5
5.3
4.7
47

(3.4)
4.8
8.3
12.5
6.7
8.1
7.6
8.6
10.0
8.3
8.1
7.5
7.4
6.8
6.6
6.5
5.9
5.6
5.9
5.4
5.4
5.8
5.6
5.0
50

13.8
14.6
18.4
9.4
10.5
9.6
10.4
11.7
9.7
9.4
8.5
8.4
7.6
7.3
7.2
6.5
6.1
6.5
5.9
5.8
6.3
6.1
5.3
53

15.4
20.8
7.9
9.7
8.8
9.8
11.5
9.2
8.9
8.0
7.9
7.1
6.8
6.8
6.0
5.7
6.0
5.5
5.4
5.9
5.7
5.0
50

1983

1984

1985

1986

1987

1988

1989

1990

1991

INVESTMENT FROM END YEAR

26.4
4.4 (13.8)
7.9
(0.3)
7.2
1.5
8.8
4.7
10.8
7.9
8.4
5.6
8.1
5.7
7.2
5.0
7.2
5.2
6.4
4.6
6.1
4.5
6.1
4.6
5.4
3.9
5.1
3.7
5.5
4.2
4.9
3.7
4.9
3.8
5.5
4.4
5.3
4.3
4.5
45
3.5
35
1992

1993

15.3
10.1
11.8
14.2
10.0
9.3
8.1
7.9
6.8
6.5
6.5
5.5
5.2
5.6
5.0
5.0
5.6
5.4
4.5
45

5.1
10.1
13.8
8.7
8.2
6.9
6.9
5.8
5.6
5.6
4.7
4.4
4.9
4.3
4.3
5.0
4.8
3.9
39

15.3
18.4
9.9
9.0
7.3
7.2
5.9
5.6
5.7
4.6
4.3
4.9
4.3
4.3
5.0
4.8
3.9
39

21.7
7.4
7.0
5.3
5.6
4.4
4.3
4.5
3.5
3.3
4.0
3.4
3.5
4.3
4.1
3.2
32

(5.2)
0.3
0.4
1.9
1.3
1.7
2.3
1.4
1.4
2.4
1.9
2.1
3.1
3.0
2.1
21

6.1
3.3
4.4
3.0
3.1
3.6
2.4
2.3
3.3
2.6
2.8
3.8
3.6
2.6
26

0.6
3.6
2.0
2.4
3.1
1.8
1.7
2.9
2.2
2.4
3.6
3.4
2.4
24

6.7
2.7
3.0
3.7
2.1
1.9
3.3
2.4
2.6
3.9
3.7
2.5
25

(1.2)
1.2
2.8
0.9
1.0
2.7
1.8
2.2
3.6
3.4
2.1
21

3.6
4.8
1.7
1.5
3.5
2.3
2.6
4.2
3.9
2.5
25

6.0
0.7
0.9
3.5
2.1
2.5
4.3
4.0
2.4
24

(4.4)
(1.7)
2.6
1.1
1.8
4.0
3.7
1.9
19

1.2
6.4
3.0
3.4
5.8
5.1
2.8
28

11.8
4.0
4.1
6.9
5.9
3.1
31

(3.3)
0.5
5.4
4.4
1.5
15

4.4
10.0
7.1
2.7
27

1.6
(4.2)
(4
2)

(9 6)
(9.6)

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2011

2012

1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

INVESTMENT TO END YEAR

INVESTMENT
MENT TO END YEAR

INVESTMENT FROM END YEAR


1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

US real return on equities - gross income re-invested


(annual average rates of return between year ends)
1925

1926

10.2
22.6
28.3
15.5
6.1
(3.3)
(2.5)
3.4
3.2
6.5
8.5
3.7
5.7
5.4
4.4
2.9
3.1
4.2
4.9
6.3
4.8
4.3
4.1
4.8
5.5
5.8
6.1
5.8
7.1
7.7
7.6
6.9
7.8
7.9
7.7
8.2
7.6
7.9
8.0
8.1
7.6
8.0
8.0
7.4
7.1
7.2
7.3
6.5
5.4
5.9
6.1
5.8
5.7
5.8
6.0
5.6
5.8
6.0
5.9
6.2
6.3
6.2
6.3
6.5
6.2
6.6
6.5
6.6
6.4
6.8
6.9
7.2
7.3
7.5
7.2
6.9
6.5
6.8
6.8
6.7
6.8
6.8
6.1
6.3
6.4
6.3
6.4
6.6

38.2
38.5 40.6
17.3
8.7 (15.9)
5.1 (3.6) (20.2) (24.3)
(5.9) (14.1) (27.1) (32.1) (39.1)
(4.5) (11.1) (20.7) (22.2) (21.2)
2.4 (2.3) (9.2) (7.4) (1.0)
2.4 (1.7) (7.4) (5.7) (0.3)
6.1
2.8 (1.7)
0.9
6.9
8.3
5.6
1.9
4.7 10.5
3.2
0.3 (3.4) (1.7)
2.1
5.3
2.9 (0.3)
1.6
5.4
5.0
2.8 (0.1)
1.6
5.0
4.0
1.9 (0.8)
0.7
3.6
2.4
0.3 (2.3) (1.0)
1.4
2.7
0.7 (1.6) (0.4)
1.9
3.8
2.1 (0.1)
1.2
3.4
4.6
3.0
1.0
2.2
4.5
6.1
4.6
2.8
4.1
6.3
4.5
3.1
1.3
2.4
4.4
4.0
2.6
1.0
2.0
3.8
3.8
2.5
0.9
1.8
3.5
4.6
3.3
1.8
2.8
4.5
5.3
4.1
2.7
3.7
5.3
5.6
4.5
3.2
4.1
5.7
5.9
4.8
3.6
4.5
6.0
5.7
4.6
3.4
4.3
5.7
7.0
6.1
4.9
5.9
7.3
7.6
6.7
5.6
6.5
8.0
7.5
6.7
5.6
6.5
7.9
6.8
5.9
4.9
5.7
7.1
7.8
6.9
6.0
6.8
8.2
7.9
7.1
6.1
7.0
8.2
7.6
6.8
5.9
6.7
7.9
8.1
7.4
6.5
7.3
8.5
7.5
6.8
5.9
6.7
7.8
7.8
7.1
6.3
7.0
8.1
8.0
7.3
6.5
7.2
8.3
8.1
7.4
6.7
7.4
8.4
7.5
6.9
6.1
6.8
7.8
7.9
7.3
6.6
7.2
8.2
8.0
7.3
6.6
7.3
8.3
7.3
6.7
6.0
6.6
7.6
7.0
6.4
5.7
6.3
7.2
7.2
6.6
5.9
6.5
7.4
7.3
6.7
6.0
6.6
7.5
6.5
5.9
5.2
5.8
6.6
5.3
4.8
4.1
4.6
5.4
5.8
5.2
4.6
5.1
5.8
6.1
5.5
4.9
5.4
6.1
5.7
5.2
4.6
5.0
5.8
5.6
5.1
4.5
4.9
5.7
5.7
5.2
4.6
5.0
5.7
5.9
5.4
4.8
5.3
6.0
5.6
5.1
4.5
4.9
5.6
5.7
5.3
4.7
5.1
5.8
5.9
5.5
4.9
5.4
6.0
5.8
5.4
4.8
5.2
5.9
6.2
5.7
5.2
5.6
6.2
6.3
5.8
5.3
5.7
6.4
6.1
5.7
5.2
5.6
6.2
6.2
5.8
5.3
5.7
6.3
6.5
6.1
5.6
6.0
6.6
6.2
5.8
5.3
5.7
6.2
6.5
6.1
5.6
6.0
6.6
6.5
6.1
5.6
6.0
6.6
6.5
6.1
5.7
6.0
6.6
6.4
6.0
5.5
5.9
6.5
6.7
6.3
5.9
6.3
6.8
6.9
6.5
6.0
6.4
7.0
7.1
6.8
6.3
6.7
7.3
7.3
6.9
6.5
6.9
7.4
7.5
7.1
6.7
7.1
7.6
7.2
6.8
6.4
6.8
7.3
6.9
6.5
6.1
6.5
7.0
6.4
6.1
5.7
6.0
6.5
6.7
6.4
6.0
6.3
6.8
6.7
6.4
6.0
6.3
6.8
6.7
6.4
6.0
6.3
6.8
6.8
6.5
6.1
6.4
6.9
6.7
6.4
6.0
6.4
6.8
6.0
5.7
5.3
5.6
6.1
6.3
5.9
5.6
5.9
6.3
6.4
6.1
5.7
6.0
6.4
6.2
5.9
5.6
5.9
6.3
6.3
6.0
5.7
6.0
6.4
6.6
6.3
5.9
6.2
6.6

1927

1925

1926

1927

1928

1928

1929

1929

1930

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

1946

1947

1948

INVESTMENT FROM END YEAR


1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

INVESTMENT FROM END YEAR


1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

HOW TO USE TABLES OF TOTAL RETURNS


2.1
26.2
17.5
23.0
24.5
11.2
14.0
12.4
9.9
6.7
6.7
8.1
8.9
10.6
8.2
7.3
6.8
7.6
8.4
8.7
8.9
8.4
10.0
10.6
10.4
9.4
10.5
10.5
10.1
10.6
9.8
10.1
10.2
10.3
9.6
10.0
10.0
9.2
8.8
8.9
9.0
8.0
6.7
7.2
7.5
7.1
6.9
7.0
7.2
6.8
6.9
7.1
7.0
7.3
7.5
7.3
7.4
7.6
7.3
7.6
7.6
7.6
7.4
7.8
7.9
8.2
8.3
8.5
8.2
7.8
7.3
7.6
7.7
7.6
7.7
7.6
6.8
7.1
7.2
7.0
7.1
7.4

56.1
26.1
30.9
30.8
13.2
16.1
14.0
10.9
7.2
7.2
8.7
9.5
11.3
8.7
7.7
7.1
8.0
8.8
9.1
9.2
8.7
10.4
11.0
10.8
9.7
10.8
10.8
10.4
10.9
10.1
10.4
10.5
10.6
9.8
10.2
10.2
9.4
9.0
9.1
9.2
8.2
6.8
7.3
7.6
7.2
7.0
7.1
7.3
6.9
7.0
7.2
7.1
7.4
7.6
7.4
7.5
7.7
7.3
7.7
7.7
7.7
7.5
7.8
8.0
8.3
8.4
8.6
8.3
7.9
7.4
7.7
7.7
7.7
7.8
7.7
6.9
7.2
7.3
7.1
7.2
7.4

1.9
19.9
23.3
4.4
9.5
8.2
5.7
2.3
2.8
4.8
6.0
8.2
5.7
4.9
4.5
5.5
6.5
6.9
7.2
6.8
8.6
9.3
9.1
8.1
9.3
9.4
9.0
9.6
8.8
9.1
9.3
9.4
8.7
9.1
9.1
8.3
7.9
8.0
8.2
7.2
5.8
6.3
6.7
6.3
6.1
6.2
6.4
6.0
6.2
6.4
6.3
6.7
6.8
6.6
6.7
7.0
6.6
7.0
7.0
7.0
6.8
7.2
7.4
7.7
7.8
8.0
7.7
7.3
6.8
7.1
7.2
7.1
7.2
7.2
6.4
6.6
6.7
6.6
6.7
6.9

41.2
35.7
5.3
11.4
9.5
6.3
2.4
3.0
5.2
6.4
8.8
6.0
5.1
4.7
5.8
6.8
7.2
7.5
7.1
8.9
9.7
9.5
8.4
9.6
9.7
9.3
9.9
9.0
9.3
9.5
9.6
8.9
9.3
9.3
8.5
8.1
8.2
8.3
7.3
5.9
6.4
6.8
6.4
6.2
6.3
6.5
6.1
6.3
6.5
6.4
6.8
6.9
6.7
6.8
7.1
6.7
7.1
7.1
7.1
6.9
7.3
7.4
7.7
7.9
8.1
7.8
7.4
6.9
7.2
7.3
7.2
7.3
7.2
6.4
6.7
6.8
6.7
6.7
7.0

1931

1932

1933

1934

30.5
(9.0) (36.6)
3.0 (8.5)
2.7 (5.1)
0.4 (5.9)
(3.0) (8.5)
(1.6) (6.1)
1.4 (2.2)
3.1
0.2
6.0
3.6
3.3
0.9
2.5
0.3
2.3
0.2
3.6
1.8
4.8
3.2
5.4
3.9
5.8
4.4
5.4
4.1
7.5
6.3
8.3
7.2
8.2
7.1
7.1
6.1
8.4
7.5
8.5
7.7
8.2
7.3
8.8
8.0
8.0
7.2
8.4
7.6
8.6
7.9
8.7
8.0
8.0
7.3
8.5
7.8
8.5
7.9
7.7
7.0
7.3
6.7
7.4
6.8
7.6
7.0
6.5
6.0
5.2
4.6
5.7
5.1
6.0
5.5
5.7
5.1
5.5
5.0
5.6
5.1
5.9
5.4
5.5
5.0
5.7
5.2
5.9
5.5
5.8
5.3
6.2
5.7
6.3
5.9
6.1
5.7
6.3
5.8
6.5
6.1
6.2
5.8
6.6
6.2
6.6
6.2
6.6
6.2
6.4
6.0
6.8
6.4
7.0
6.6
7.3
6.9
7.5
7.1
7.7
7.4
7.3
7.0
7.0
6.7
6.5
6.1
6.8
6.5
6.8
6.5
6.8
6.5
6.9
6.6
6.8
6.5
6.0
5.7
6.3
6.0
6.4
6.1
6.3
6.0
6.4
6.1
6.6
6.3
1935

1936

32.0
16.0
7.3
0.2
1.6
5.1
6.9
10.2
6.2
5.0
4.5
5.9
7.1
7.6
7.9
7.4
9.6
10.4
10.1
8.9
10.3
10.3
9.8
10.4
9.5
9.8
10.0
10.1
9.3
9.7
9.7
8.8
8.4
8.5
8.6
7.5
6.0
6.5
6.9
6.4
6.3
6.4
6.6
6.2
6.4
6.6
6.5
6.8
7.0
6.8
6.9
7.2
6.8
7.2
7.2
7.2
7.0
7.4
7.6
7.9
8.1
8.3
7.9
7.5
7.0
7.3
7.3
7.3
7.4
7.3
6.5
6.7
6.9
6.7
6.8
7.1
1937

2.0
(3.3) (8.3)
(8.5) (13.4) (18.3)
(4.9) (7.1) (6.5)
0.4 (0.0)
2.9
3.2
3.5
6.6
7.4
8.3 12.0
3.4
3.6
5.7
2.4
2.4
4.1
2.1
2.1
3.4
3.8
4.0
5.4
5.3
5.6
7.1
5.9
6.3
7.7
6.4
6.7
8.1
5.9
6.2
7.4
8.3
8.8 10.1
9.3
9.7 11.0
9.0
9.5 10.7
7.8
8.1
9.1
9.3
9.7 10.8
9.3
9.7 10.8
8.9
9.2 10.2
9.6
9.9 10.9
8.6
8.9
9.8
9.0
9.3 10.2
9.2
9.5 10.4
9.4
9.6 10.4
8.5
8.8
9.5
9.0
9.3 10.0
9.0
9.3 10.0
8.1
8.3
9.0
7.7
7.9
8.5
7.8
8.0
8.6
8.0
8.2
8.7
6.9
7.0
7.5
5.4
5.4
5.9
5.9
6.0
6.5
6.3
6.4
6.8
5.9
6.0
6.4
5.7
5.8
6.2
5.8
5.9
6.3
6.1
6.2
6.6
5.6
5.7
6.1
5.9
5.9
6.3
6.1
6.2
6.6
6.0
6.1
6.4
6.4
6.5
6.8
6.5
6.6
7.0
6.3
6.4
6.8
6.5
6.6
6.9
6.8
6.9
7.2
6.4
6.5
6.8
6.8
6.9
7.2
6.8
6.9
7.2
6.8
6.9
7.2
6.6
6.7
7.0
7.0
7.1
7.4
7.2
7.3
7.6
7.5
7.6
7.9
7.7
7.8
8.1
7.9
8.0
8.3
7.5
7.6
7.9
7.2
7.3
7.5
6.6
6.7
7.0
7.0
7.0
7.3
7.0
7.1
7.3
7.0
7.0
7.3
7.0
7.1
7.4
7.0
7.1
7.3
6.2
6.2
6.4
6.4
6.5
6.7
6.6
6.6
6.9
6.4
6.5
6.7
6.5
6.6
6.8
6.8
6.8
7.1
1938

1939

1940

The dates along the top (and bottom) are those on which each
portfolio starts; those down the side are the dates to which the
annual rate of return is calculated. Thus the figure at the bottom
right hand corner - 28.6 - shows that the real return on a portfolio
bought at the end of December 2012 and held for one year to
December 2013 was 28.6%. Figures in brackets indicate negative
returns.

7.1
15.4
16.5
21.1
11.2
8.3
7.0
8.8
10.3
10.7
10.9
9.9
12.7
13.5
12.9
11.1
12.8
12.6
11.9
12.6
11.3
11.7
11.8
11.8
10.8
11.3
11.2
10.1
9.5
9.6
9.7
8.4
6.7
7.3
7.7
7.2
7.0
7.0
7.3
6.8
7.0
7.3
7.1
7.5
7.6
7.4
7.5
7.8
7.4
7.8
7.7
7.8
7.5
7.9
8.1
8.4
8.6
8.9
8.4
8.0
7.4
7.8
7.8
7.7
7.8
7.8
6.9
7.1
7.3
7.1
7.2
7.5

24.5
21.5
26.2
12.3
8.6
7.0
9.1
10.8
11.1
11.3
10.2
13.1
14.0
13.4
11.4
13.1
13.0
12.2
12.9
11.5
11.9
12.0
12.0
10.9
11.5
11.4
10.2
9.6
9.7
9.8
8.5
6.7
7.3
7.7
7.2
6.9
7.0
7.3
6.8
7.0
7.3
7.1
7.5
7.6
7.4
7.5
7.8
7.4
7.8
7.7
7.8
7.5
8.0
8.1
8.5
8.7
8.9
8.4
8.0
7.4
7.8
7.8
7.8
7.8
7.8
6.9
7.1
7.3
7.1
7.2
7.5

18.7
27.1
8.5
5.0
3.8
6.7
8.9
9.6
9.9
8.8
12.2
13.2
12.6
10.5
12.4
12.3
11.5
12.3
10.9
11.3
11.5
11.5
10.4
10.9
10.9
9.7
9.1
9.2
9.4
8.0
6.2
6.8
7.2
6.7
6.5
6.6
6.9
6.3
6.6
6.9
6.7
7.1
7.3
7.0
7.2
7.5
7.0
7.5
7.4
7.5
7.2
7.7
7.8
8.2
8.4
8.6
8.2
7.8
7.2
7.5
7.6
7.5
7.6
7.5
6.6
6.9
7.0
6.9
7.0
7.2

1941

1942

1943

36.1
3.8 (20.8)
0.7 (13.3)
0.3 (9.4)
4.5 (2.2)
7.4
2.4
8.3
4.3
8.8
5.4
7.8
4.7
11.5
9.1
12.7 10.6
12.1 10.1
9.9
8.0
12.0 10.3
11.9 10.3
11.1
9.6
11.9 10.6
10.5
9.1
10.9
9.7
11.1
9.9
11.2 10.1
10.0
8.9
10.6
9.6
10.5
9.6
9.3
8.3
8.7
7.8
8.9
7.9
9.0
8.2
7.6
6.7
5.8
4.9
6.4
5.6
6.9
6.0
6.4
5.5
6.1
5.3
6.3
5.5
6.6
5.8
6.0
5.3
6.3
5.6
6.6
5.9
6.4
5.7
6.8
6.2
7.0
6.4
6.8
6.2
6.9
6.3
7.2
6.7
6.8
6.2
7.2
6.7
7.2
6.7
7.2
6.7
7.0
6.5
7.5
7.0
7.6
7.1
8.0
7.5
8.2
7.7
8.5
8.0
8.0
7.6
7.6
7.2
7.0
6.5
7.4
6.9
7.4
7.0
7.3
6.9
7.4
7.0
7.4
6.9
6.4
6.0
6.7
6.3
6.9
6.5
6.7
6.3
6.8
6.4
7.1
6.7
1944

1945

Each figure on the bottom line of the table shows the average annual
return up to the end of December 2013 from the year shown below
the figure. The first figure is 6.6, showing that the average annual
rate of return over the whole period since 1925 has been 6.6%.

(5.1)
(3.0)
4.9
9.2
10.2
10.6
8.9
13.5
14.8
13.8
11.1
13.4
13.2
12.2
13.1
11.3
11.8
12.0
12.0
10.7
11.3
11.2
9.8
9.2
9.3
9.5
7.9
5.9
6.6
7.1
6.5
6.3
6.4
6.7
6.2
6.4
6.7
6.5
7.0
7.2
6.9
7.1
7.4
6.9
7.4
7.4
7.4
7.2
7.6
7.8
8.2
8.4
8.6
8.2
7.7
7.1
7.5
7.5
7.5
7.5
7.5
6.5
6.8
7.0
6.8
6.9
7.2

(0.9)
10.3
14.5
14.4
14.0
11.5
16.5
17.5
16.1
12.8
15.2
14.9
13.6
14.5
12.5
12.9
13.1
13.0
11.6
12.2
12.0
10.6
9.8
9.9
10.1
8.5
6.4
7.1
7.5
6.9
6.7
6.8
7.1
6.5
6.8
7.1
6.9
7.3
7.5
7.2
7.4
7.7
7.2
7.7
7.7
7.7
7.4
7.9
8.1
8.5
8.7
8.9
8.4
8.0
7.3
7.7
7.8
7.7
7.8
7.7
6.7
7.0
7.2
7.0
7.1
7.4

22.7
23.0
20.0
18.1
14.1
19.7
20.4
18.4
14.5
17.0
16.4
14.9
15.8
13.6
13.9
14.0
13.9
12.3
12.9
12.7
11.1
10.3
10.4
10.6
8.8
6.6
7.4
7.8
7.2
6.9
7.0
7.4
6.7
7.0
7.3
7.1
7.6
7.7
7.5
7.6
7.9
7.4
7.9
7.9
7.9
7.6
8.1
8.3
8.7
8.9
9.1
8.6
8.2
7.5
7.9
7.9
7.8
7.9
7.8
6.8
7.2
7.3
7.1
7.2
7.5

23.3
18.6
16.6
12.1
19.1
20.1
17.8
13.5
16.4
15.8
14.3
15.2
12.9
13.3
13.4
13.4
11.7
12.4
12.2
10.6
9.8
9.9
10.1
8.3
6.0
6.8
7.3
6.7
6.4
6.6
6.9
6.3
6.6
6.9
6.7
7.2
7.4
7.1
7.2
7.6
7.1
7.6
7.5
7.6
7.3
7.8
8.0
8.4
8.6
8.9
8.4
7.9
7.2
7.6
7.7
7.6
7.7
7.6
6.6
6.9
7.1
6.9
7.0
7.3

14.1
13.3
8.6
18.0
19.4
17.0
12.1
15.5
15.0
13.4
14.5
12.1
12.6
12.8
12.7
11.0
11.8
11.6
10.0
9.2
9.3
9.5
7.7
5.4
6.2
6.8
6.1
5.9
6.0
6.4
5.8
6.1
6.4
6.2
6.7
6.9
6.7
6.8
7.2
6.7
7.2
7.2
7.2
7.0
7.5
7.7
8.1
8.3
8.6
8.1
7.6
6.9
7.4
7.4
7.3
7.4
7.4
6.3
6.7
6.8
6.6
6.7
7.1

12.5
5.9
19.4
20.8
17.5
11.8
15.7
15.1
13.3
14.5
11.9
12.4
12.7
12.6
10.8
11.6
11.5
9.7
8.9
9.1
9.3
7.4
5.0
5.9
6.5
5.8
5.6
5.7
6.2
5.5
5.8
6.2
6.0
6.5
6.7
6.5
6.6
7.0
6.5
7.0
7.0
7.1
6.8
7.3
7.5
7.9
8.2
8.5
8.0
7.5
6.8
7.2
7.3
7.2
7.3
7.2
6.2
6.5
6.7
6.5
6.6
6.9

(0.4)
22.9
23.6
18.8
11.7
16.3
15.5
13.4
14.7
11.8
12.4
12.7
12.6
10.7
11.6
11.4
9.6
8.7
8.9
9.1
7.2
4.7
5.6
6.2
5.6
5.3
5.5
5.9
5.3
5.6
6.0
5.8
6.4
6.6
6.3
6.5
6.9
6.4
6.9
6.9
6.9
6.7
7.2
7.4
7.8
8.1
8.4
7.9
7.4
6.7
7.1
7.2
7.1
7.2
7.1
6.1
6.4
6.6
6.4
6.5
6.9

51.7
37.8
26.0
14.9
19.9
18.3
15.5
16.8
13.3
13.8
13.9
13.8
11.6
12.5
12.3
10.2
9.3
9.4
9.6
7.6
4.9
5.9
6.5
5.8
5.6
5.7
6.2
5.5
5.8
6.2
6.0
6.6
6.8
6.5
6.7
7.1
6.6
7.1
7.1
7.1
6.8
7.4
7.6
8.0
8.3
8.6
8.0
7.6
6.8
7.3
7.3
7.3
7.4
7.3
6.2
6.6
6.7
6.5
6.6
7.0

25.1
14.8
4.7
13.1
12.6
10.4
12.5
9.2
10.2
10.7
10.9
8.8
9.9
9.9
7.9
7.0
7.4
7.7
5.6
3.0
4.1
4.8
4.2
4.0
4.2
4.7
4.1
4.5
4.9
4.7
5.4
5.6
5.4
5.6
6.0
5.5
6.1
6.1
6.2
5.9
6.5
6.7
7.2
7.5
7.8
7.3
6.8
6.1
6.5
6.6
6.5
6.7
6.6
5.5
5.9
6.1
5.9
6.0
6.3

1946

1947

1948

1949

1950

1951

1952

1953

1954

INVESTMENT FROM END YEAR

5.4
(4.2) (12.9)
9.3 11.4
9.7 11.2
7.7
8.2
10.5 11.6
7.1
7.4
8.5
9.0
9.2
9.7
9.5 10.0
7.4
7.6
8.7
9.1
8.8
9.1
6.8
6.9
5.9
6.0
6.3
6.4
6.7
6.8
4.6
4.6
2.0
1.8
3.2
3.0
3.9
3.9
3.3
3.2
3.2
3.0
3.4
3.3
4.0
3.9
3.3
3.2
3.8
3.7
4.3
4.2
4.1
4.0
4.8
4.7
5.1
5.1
4.8
4.8
5.0
5.0
5.5
5.5
5.0
5.0
5.6
5.6
5.6
5.6
5.7
5.7
5.5
5.5
6.1
6.1
6.3
6.4
6.8
6.8
7.1
7.1
7.4
7.5
6.9
6.9
6.4
6.4
5.7
5.7
6.2
6.2
6.2
6.3
6.2
6.2
6.3
6.3
6.3
6.3
5.2
5.2
5.6
5.6
5.7
5.7
5.6
5.6
5.7
5.7
6.1
6.1
1955

1956

42.4
25.6
16.4
18.7
12.0
13.1
13.4
13.3
10.1
11.5
11.3
8.7
7.6
7.9
8.3
5.8
2.7
4.0
4.8
4.1
3.9
4.1
4.7
4.0
4.4
4.9
4.7
5.4
5.7
5.4
5.7
6.2
5.6
6.2
6.2
6.3
6.0
6.6
6.9
7.4
7.7
8.0
7.4
6.9
6.2
6.6
6.7
6.6
6.8
6.7
5.6
5.9
6.1
5.9
6.1
6.4

10.7
5.2
11.8
5.4
8.0
9.2
9.6
6.7
8.5
8.6
6.1
5.1
5.6
6.2
3.7
0.6
2.1
3.1
2.4
2.3
2.6
3.3
2.6
3.1
3.7
3.5
4.3
4.6
4.4
4.6
5.2
4.6
5.3
5.3
5.4
5.1
5.8
6.1
6.6
6.9
7.3
6.7
6.2
5.5
6.0
6.0
6.0
6.1
6.1
4.9
5.3
5.5
5.3
5.5
5.9

(0.1)
12.3
3.7
7.3
8.9
9.4
6.1
8.3
8.4
5.6
4.6
5.2
5.9
3.2
0.0
1.6
2.6
1.9
1.8
2.2
2.9
2.2
2.8
3.4
3.2
4.0
4.4
4.1
4.4
5.0
4.4
5.1
5.1
5.2
5.0
5.7
6.0
6.5
6.8
7.2
6.6
6.1
5.3
5.9
5.9
5.9
6.0
6.0
4.8
5.2
5.4
5.2
5.4
5.8

1957

1958

1959

The top figure in each column is the rate of return in the first year, so
that reading diagonally down the table gives the real rate of return in
each year since 1925. The table can be used to see the rate of return
p
; thus a p
over anyy period;
purchase made at the end of 1926 would
have gained 38.2% in value in one year (allowing for reinvestment of
er the first fi
ears (up to the end of 1931)
ould
income) but
but, o
over
fivee years
1931), would
have fallen in value by an average annual real rate of -5.9%.
26.2
5.7 (11.5)
9.9
2.6
11.2
6.7
11.4
8.0
7.2
3.7
9.5
7.0
9.5
7.3
6.3
4.0
5.1
3.0
5.7
3.9
6.4
4.7
3.5
1.8
0.0 (1.8)
1.7
0.2
2.8
1.4
2.1
0.7
1.9
0.7
2.3
1.2
3.1
2.0
2.3
1.3
2.9
1.9
3.5
2.6
3.4
2.5
4.2
3.4
4.6
3.8
4.3
3.5
4.6
3.9
5.2
4.5
4.6
3.9
5.3
4.7
5.3
4.7
5.4
4.8
5.1
4.6
5.8
5.3
6.1
5.6
6.7
6.2
7.0
6.6
7.4
6.9
6.8
6.3
6.3
5.8
5.5
5.0
6.0
5.6
6.1
5.6
6.0
5.6
6.2
5.8
6.1
5.7
4.9
4.5
5.3
4.9
5.5
5.2
5.4
5.0
5.5
5.1
5.9
5.5
1960

1961

19.0
17.1
15.4
7.9
11.1
10.8
6.5
4.9
5.7
6.5
3.1
(0.9)
1.1
2.4
1.6
1.5
1.9
2.8
2.0
2.6
3.3
3.1
4.1
4.5
4.2
4.5
5.1
4.5
5.3
5.3
5.4
5.1
5.9
6.2
6.7
7.1
7.5
6.9
6.3
5.5
6.0
6.1
6.0
6.2
6.1
4.9
5.3
5.5
5.3
5.5
5.9

15.2
13.7
4.5
9.2
9.2
4.5
3.1
4.2
5.2
1.7
(2.5)
(0.3)
1.2
0.5
0.4
1.0
1.9
1.1
1.8
2.6
2.4
3.4
3.9
3.6
4.0
4.6
4.0
4.8
4.9
5.0
4.7
5.5
5.8
6.4
6.8
7.2
6.5
6.0
5.1
5.7
5.8
5.7
5.9
5.9
4.6
5.0
5.3
5.1
5.2
5.7

12.2
(0.5) (11.8)
7.3
4.9
7.7
6.3
2.5
0.2
1.2 (0.9)
2.7
1.2
4.0
2.9
0.2 (1.2)
(4.1) (5.8)
(1.6) (2.8)
0.1 (0.9)
(0.6) (1.6)
(0.6) (1.5)
0.1 (0.7)
1.2
0.5
0.3 (0.4)
1.1
0.5
2.0
1.4
1.8
1.3
2.9
2.5
3.4
3.0
3.1
2.7
3.5
3.2
4.2
3.9
3.6
3.2
4.4
4.2
4.5
4.2
4.6
4.4
4.4
4.1
5.2
4.9
5.5
5.3
6.1
6.0
6.5
6.4
7.0
6.8
6.3
6.1
5.7
5.6
4.9
4.7
5.5
5.3
5.6
5.4
5.5
5.4
5.7
5.6
5.6
5.5
4.4
4.2
4.8
4.7
5.1
4.9
4.9
4.7
5.0
4.9
5.5
5.3

24.8
16.7
4.5
2.0
4.0
5.6
0.5
(5.0)
(1.8)
0.3
(0.6)
(0.6)
0.2
1.4
0.4
1.4
2.3
2.1
3.3
3.8
3.5
3.9
4.7
3.9
4.8
4.9
5.0
4.7
5.6
5.9
6.6
7.0
7.4
6.7
6.1
5.2
5.8
5.9
5.8
6.0
6.0
4.6
5.1
5.3
5.1
5.3
5.7

9.1
(4.3) (16.1)
(4.6) (10.8) (5.2)
(0.6) (3.6)
3.3 12.5
2.1
0.4
6.6 13.0 13.5
(3.1) (5.4) (2.5) (1.6) (7.9) (25.3)
(8.7) (11.3) (10.3) (11.6) (18.4) (30.9) (36.0)
(4.7) (6.5) (4.8) (4.7) (8.6) (15.0) (9.3)
(2.1) (3.4) (1.5) (0.9) (3.3) (7.1) (0.1)
(2.8) (4.1) (2.5) (2.1) (4.3) (7.5) (2.5)
(2.6) (3.7) (2.2) (1.9) (3.8) (6.4) (2.1)
(1.6) (2.6) (1.1) (0.6) (2.2) (4.2) (0.2)
(0.2) (1.0)
0.5
1.1 (0.1) (1.6)
2.3
(1.1) (1.8) (0.5) (0.1) (1.3) (2.8)
0.4
(0.0) (0.7)
0.6
1.1
0.2 (1.1)
2.1
1.0
0.5
1.8
2.4
1.6
0.5
3.6
0.9
0.4
1.6
2.1
1.4
0.4
3.2
2.2
1.8
3.0
3.6
3.0
2.2
4.9
2.8
2.5
3.7
4.3
3.7
3.1
5.6
2.5
2.2
3.3
3.8
3.3
2.7
5.0
3.0
2.7
3.8
4.3
3.8
3.3
5.5
3.8
3.6
4.7
5.2
4.8
4.3
6.5
3.1
2.8
3.8
4.3
3.9
3.4
5.4
4.1
3.9
4.9
5.4
5.1
4.6
6.6
4.2
4.0
4.9
5.4
5.1
4.7
6.6
4.3
4.2
5.1
5.6
5.3
4.9
6.7
4.0
3.9
4.7
5.2
4.9
4.5
6.2
4.9
4.8
5.7
6.1
5.9
5.6
7.2
5.3
5.2
6.1
6.6
6.3
6.0
7.7
6.0
5.9
6.8
7.3
7.1
6.8
8.5
6.5
6.4
7.3
7.7
7.6
7.3
8.9
6.9
6.9
7.7
8.2
8.0
7.8
9.4
6.2
6.1
6.9
7.4
7.2
7.0
8.4
5.6
5.5
6.3
6.7
6.5
6.2
7.6
4.7
4.5
5.2
5.6
5.4
5.1
6.4
5.3
5.2
5.9
6.3
6.1
5.9
7.1
5.4
5.3
6.0
6.4
6.2
6.0
7.2
5.4
5.3
6.0
6.3
6.1
5.9
7.1
5.6
5.5
6.2
6.5
6.3
6.1
7.2
5.5
5.4
6.1
6.4
6.2
6.0
7.1
4.2
4.0
4.6
4.9
4.7
4.4
5.4
4.7
4.6
5.1
5.4
5.2
5.0
6.0
4.9
4.8
5.4
5.7
5.5
5.3
6.3
4.7
4.6
5.2
5.4
5.2
5.0
6.0
4.9
4.8
5.3
5.6
5.4
5.3
6.2
5.4
5.3
5.8
6.1
5.9
5.8
6.7

1962

1963

1964

1966

1967

1965

1968

1969

1970

INVESTMENT FROM END YEAR

1971

1972

1973

28.6
24.7
12.2
8.9
9.1
10.6
7.1
8.2
9.3
8.2
9.8
10.1
9.1
9.4
10.2
8.7
9.8
9.6
9.6
8.9
9.9
10.2
11.0
11.3
11.7
10.6
9.7
8.3
9.0
9.0
8.9
9.0
8.8
7.0
7.6
7.8
7.4
7.6
8.1

20.9
4.9
3.1
4.7
7.4
3.9
5.5
7.1
6.2
8.0
8.6
7.6
8.0
9.0
7.5
8.8
8.6
8.6
7.9
9.1
9.4
10.2
10.6
11.1
10.0
9.0
7.6
8.4
8.4
8.2
8.4
8.2
6.4
7.0
7.2
6.9
7.1
7.6

(9.1)
(4.8)
(0.2)
4.2
0.8
3.2
5.2
4.4
6.7
7.4
6.5
7.0
8.1
6.6
8.0
7.9
7.9
7.3
8.5
8.9
9.7
10.2
10.7
9.5
8.5
7.1
7.9
8.0
7.8
8.0
7.9
6.0
6.6
6.9
6.5
6.7
7.3

(0.4)
4.6
9.1
3.4
5.8
7.8
6.5
8.9
9.5
8.2
8.6
9.7
7.9
9.3
9.1
9.1
8.3
9.5
9.9
10.8
11.2
11.7
10.4
9.4
7.8
8.6
8.7
8.5
8.7
8.5
6.5
7.1
7.4
7.0
7.2
7.8

9.9
14.1
4.7
7.4
9.5
7.7
10.3
10.8
9.2
9.5
10.7
8.6
10.1
9.8
9.8
8.9
10.1
10.5
11.4
11.8
12.3
10.9
9.8
8.2
9.0
9.0
8.8
9.0
8.8
6.8
7.4
7.6
7.3
7.5
8.0

1974

1975

1976

1977

1978

18.5
2.2 (11.9)
6.6
1.1
9.4
6.5
7.3
4.7
10.3
8.7
10.9
9.7
9.1
7.8
9.5
8.4
10.8
9.9
8.5
7.6
10.2
9.4
9.8
9.1
9.7
9.1
8.8
8.2
10.2
9.6
10.6 10.1
11.5 11.1
11.9 11.6
12.4 12.1
11.0 10.6
9.8
9.4
8.1
7.7
9.0
8.6
9.0
8.6
8.8
8.4
9.0
8.6
8.8
8.4
6.6
6.2
7.3
6.9
7.6
7.2
7.2
6.8
7.4
7.0
7.9
7.6
1979

1980

16.0
17.1
10.8
14.6
14.6
11.5
11.7
13.0
10.0
11.8
11.3
11.1
9.9
11.3
11.7
12.7
13.1
13.6
12.0
10.6
8.7
9.6
9.6
9.4
9.5
9.3
7.0
7.7
7.9
7.5
7.7
8.3

18.2
8.3
14.1
14.2
10.6
11.0
12.6
9.2
11.4
10.8
10.6
9.4
11.0
11.4
12.5
13.0
13.5
11.7
10.3
8.4
9.3
9.3
9.1
9.3
9.0
6.6
7.4
7.7
7.2
7.5
8.1

(0.8)
12.1
12.9
8.8
9.6
11.7
8.0
10.5
10.0
9.9
8.6
10.4
10.9
12.1
12.6
13.2
11.4
9.9
7.9
8.9
8.9
8.7
8.9
8.6
6.2
7.0
7.3
6.9
7.1
7.8

26.7
20.4
12.2
12.3
14.3
9.6
12.2
11.4
11.1
9.6
11.5
12.0
13.1
13.6
14.2
12.2
10.5
8.4
9.4
9.4
9.2
9.3
9.1
6.5
7.3
7.6
7.2
7.4
8.1

14.4
5.6
7.9
11.4
6.4
10.0
9.4
9.3
7.8
10.1
10.7
12.1
12.7
13.3
11.3
9.6
7.4
8.5
8.6
8.3
8.6
8.3
5.7
6.5
6.9
6.5
6.7
7.4

(2.5)
4.8
10.5
4.5
9.1
8.6
8.6
7.0
9.6
10.3
11.9
12.5
13.2
11.0
9.3
6.9
8.2
8.3
8.0
8.3
8.0
5.3
6.2
6.6
6.2
6.5
7.2

12.6
17.6
7.0
12.3
11.0
10.6
8.5
11.2
11.9
13.4
14.0
14.7
12.2
10.2
7.6
8.9
9.0
8.7
8.9
8.6
5.7
6.6
7.0
6.5
6.8
7.6

1981

1982

1983

1984

1985

1986

1987

22.8
4.3 (11.5)
12.1
7.2
10.6
6.8
10.2
7.2
7.8
5.0
11.0
9.2
11.8 10.3
13.5 12.4
14.2 13.2
14.9 14.1
12.1 11.2
10.0
9.0
7.3
6.1
8.7
7.7
8.7
7.9
8.4
7.6
8.7
7.9
8.4
7.6
5.4
4.5
6.4
5.6
6.8
6.1
6.3
5.6
6.6
5.9
7.4
6.8
1988

1989

29.8
17.3
14.3
9.6
13.8
14.4
16.3
16.8
17.4
13.8
11.1
7.8
9.4
9.4
9.0
9.3
8.9
5.5
6.6
7.0
6.5
6.8
7.7

6.0
7.3
3.6
10.2
11.6
14.2
15.0
15.9
12.1
9.4
6.0
7.8
8.0
7.7
8.0
7.7
4.2
5.4
6.0
5.4
5.8
6.8

8.6
2.5
11.6
13.0
15.9
16.6
17.4
12.9
9.7
6.0
8.0
8.1
7.8
8.2
7.8
4.1
5.4
6.0
5.4
5.8
6.8

(3.4)
13.1
14.5
17.8
18.3
18.9
13.5
9.9
5.7
7.9
8.1
7.7
8.1
7.8
3.8
5.2
5.8
5.2
5.7
6.7

32.4
24.6
25.8
24.4
23.9
16.6
11.9
6.8
9.3
9.3
8.8
9.2
8.7
4.4
5.8
6.4
5.8
6.2
7.3

17.3
22.6
21.9
21.9
13.7
8.8
3.6
6.7
7.0
6.7
7.3
6.9
2.5
4.1
4.9
4.3
4.8
6.0

28.2
24.2
23.5
12.8
7.2
1.5
5.2
5.8
5.5
6.3
6.0
1.3
3.2
4.0
3.5
4.1
5.4

20.3
21.2
8.1
2.5
(3.1)
1.8
2.9
3.0
4.1
4.0
(0.8)
1.3
2.4
1.9
2.7
4.1

22.0
2.5 (14.0)
(2.8) (13.3) (12.6)
(8.2) (16.6) (17.8) (22.7)
(1.5) (6.6) (4.1)
0.5
0.2 (3.6) (0.9)
3.4
0.7 (2.4)
0.1
3.5
2.2 (0.3)
2.2
5.4
2.3
0.1
2.3
5.0
(2.7) (5.1) (4.0) (2.7)
(0.3) (2.3) (0.9)
0.7
1.0 (0.7)
0.7
2.3
0.6 (1.0)
0.3
1.7
1.5
0.1
1.3
2.7
3.1
1.9
3.2
4.6

1990

1991

1992

1993

1994

1995

1996

1997

1998

INVESTMENT FROM END YEAR

1999

2000

2001

30.7
19.6
14.1
13.9
11.7
1.1
4.6
5.9
4.8
5.7
7.6

9.5
6.6
8.8
7.3
(3.9)
0.8
2.8
1.9
3.2
5.5

3.8
8.5 13.3
6.6
8.1
3.1
(7.0) (10.3) (20.3) (38.3)
(0.9) (2.0) (6.7) (11.2)
1.7
1.3 (1.5) (2.9)
0.9
0.4 (2.0) (3.2)
2.4
2.3
0.5
0.0
5.1
5.2
4.1
4.3

2002

2003

2004

2005

2006

2007

27.9
21.8
12.5
12.8
15.8

16.0
5.6
8.2
13.0

(3.9)
4.6
12.0

13.8
21.0

2008

2009

2010

2011

2012
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
28.6 2012
2012

INVESTMENT TO END YEAR


INV

INVESTMENT TO END
D YEA
YEAR

INVESTMENT FROM END YEAR


1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

US real return on bonds - gross income re-invested


(annual average rates of return between year ends)

INVESTMENT FROM END YEAR

INVESTMENT FROM END YEAR

INVESTMENT FROM END YEAR

8.8
10.1
7.1
5.9
7.1
6.7
9.7
8.3
8.3
7.7
7.5
66
6.6
6.8
6.7
6.6
5.6
4.9
4.6
4.4
4.6
3.5
2.8
2.7
3.0
2.6
2.1
2.1
2.1
2.3
2.2
1.8
1.9
1.6
1.5
1.7
1.7
1.8
1.7
1.7
1.6
1.6
1.4
1.2
0.9
1.0
1.2
1.3
1.0
0.8
0.8
1
1.0
0
0.9
0.7
0.4
0.2
0.0
0.5
0.5
0.7
1.0
1.4
1.2
1.3
1.5
1.4
1.6
1.7
1.8
1.7
20
2.0
1.9
2.1
2.2
2.0
2.2
2.2
2.3
2.3
2.3
2.4
2.3
2.3
2.6
2.3
2.4
2.6
2.6
2.4

11.3
6.2
5.0
6.6
6.2
9.9
8.3
8.3
7.5
7.4
64
6.4
6.6
6.5
6.5
5.4
4.7
4.4
4.1
4.4
3.3
2.6
2.5
2.7
2.4
1.9
1.8
1.9
2.1
2.0
1.6
1.7
1.4
1.3
1.5
1.5
1.6
1.5
1.6
1.5
1.4
1.2
1.0
0.7
0.8
1.1
1.1
0.9
0.7
0.6
0.9
09
0.7
0.5
0.3
(0.0)
(0.1)
0.4
0.4
0.5
0.9
1.2
1.1
1.2
1.3
1.3
1.5
1.6
1.7
1.6
19
1.9
1.8
2.0
2.1
1.9
2.1
2.1
2.2
2.2
2.3
2.3
2.2
2.3
2.5
2.3
2.3
2.6
2.6
2.4

1.3
2.0
5.1
5.0
9.6
7.8
7.8
7.1
7.0
60
6.0
6.2
6.2
6.1
5.0
4.3
3.9
3.7
4.0
2.9
2.1
2.1
2.4
2.0
1.5
1.5
1.5
1.7
1.6
1.3
1.4
1.1
1.0
1.3
1.2
1.4
1.3
1.3
1.2
1.2
0.9
0.8
0.5
0.6
0.9
0.9
0.6
0.5
0.4
0.7
07
0.5
0.3
0.1
(0.2)
(0.3)
0.2
0.2
0.3
0.7
1.1
1.0
1.0
1.2
1.2
1.4
1.4
1.6
1.4
18
1.8
1.7
1.8
2.0
1.8
2.0
2.0
2.1
2.1
2.1
2.2
2.1
2.2
2.4
2.2
2.2
2.5
2.5
2.3

2.7
7.1
6.3
11.8
9.1
9.0
7.9
7.7
65
6.5
6.7
6.6
6.5
5.3
4.5
4.1
3.9
4.1
2.9
2.2
2.1
2.4
2.0
1.5
1.5
1.5
1.8
1.7
1.3
1.4
1.1
0.9
1.3
1.2
1.4
1.3
1.3
1.2
1.2
0.9
0.8
0.5
0.6
0.9
0.9
0.6
0.4
0.4
0.6
06
0.5
0.3
0.0
(0.2)
(0.3)
0.2
0.1
0.3
0.7
1.1
0.9
1.0
1.2
1.2
1.4
1.4
1.6
1.4
18
1.8
1.7
1.8
2.0
1.8
2.0
2.0
2.1
2.1
2.1
2.2
2.1
2.2
2.4
2.2
2.2
2.5
2.5
2.3

1926
1927
1928
1929
1930
1931
The dates along the top (and bottom) are those on which
1932
each portfolio starts; those down the side are the dates to
1933
1934
which the annual rate of return is calculated. Thus the figure
1935
at the bottom right hand corner - (13) - shows that the real
1936
return on a portfolio bought at the end of December 2012
1937
1938
and held for one year to December 2013 was -13%. Figures in
1939
brackets indicate negative returns.
1940
1941
1942
Each figure on the bottom line of the table shows the average
1943
annual return up to the end of December 2013 from the year
1944
shown below the figure. The first figure is 2.4, showing that
1945
1946
the average annual rate of return over the whole period since
1947
1925 has been 2.4%.
1948
1949
1950
The top figure in each column is the rate of return in the first
1951
year, so that reading diagonally down the table gives the real
1952
1953
rate of return in each year since 1925. The table can be used
1954
to see the rate of return over any period; thus a purchase
1955
made at the end of 1926 would have gained 11.3% in value in
1956
1957
one year (allowing for reinvestment of income) but, over the
1958
first five years (up to the end of 1931), would have risen in
1959
value by an average annual real rate of 6.2%.
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2.6
2001
8.1 13.9
2002
5.6
7.1
0.7
2003
5.4
6.3
2.7
4.7
2004
5.1
5.7
3.1
4.4
4.0
2005
4.0
4.3
2.0
2.5
1.4 (1.2)
2006
4.2
4.5
2.7
3.2
2.7
2.0
5.2
2007
6.6
7.1
6.0
7.1
7.7
9.0 14.5 24.6
2008
3.8
4.0
2.7
3.0
2.6
2.3
3.5
2.6 (15.5)
2009
4.2
4.4
3.3
3.7
3.5
3.4
4.6
4.4 (4.5)
8.0
2010
5.8
6.1
5.3
5.9
6.0
6.4
7.9
8.6
3.8 15.0 22.5
2011
5.5
5.7
5.0
5.4
5.5
5.7
6.9
7.3
3.3 10.5 11.8
2.1
2012
3.9
4.0
3.2
3.4
3.3
3.2
3.8
3.6 (0.2)
4.1
2.8 (5.8) (13.0) 2013

HOW TO USE TABLES OF TOTAL RETURNS


11.7
8.1
15.0
10.8
10.3
8.9
8.4
70
7.0
7.1
7.0
6.9
5.5
4.6
4.2
4.0
4.2
3.0
2.2
2.1
2.4
2.0
1.5
1.4
1.5
1.7
1.6
1.2
1.3
1.1
0.9
1.2
1.2
1.3
1.2
1.3
1.2
1.2
0.9
0.7
0.4
0.5
0.8
0.8
0.6
0.4
0.4
0.6
06
0.5
0.3
(0.0)
(0.3)
(0.4)
0.1
0.1
0.3
0.7
1.0
0.9
1.0
1.2
1.2
1.4
1.4
1.6
1.4
17
1.7
1.7
1.8
2.0
1.8
2.0
2.0
2.1
2.1
2.1
2.2
2.1
2.2
2.4
2.2
2.2
2.5
2.5
2.3

4.6
16.6
10.5
9.9
8.3
7.9
63
6.3
6.6
6.5
6.4
5.0
4.1
3.7
3.4
3.8
2.4
1.6
1.6
1.9
1.5
1.0
1.0
1.1
1.3
1.2
0.8
1.0
0.7
0.5
0.9
0.8
1.0
0.9
1.0
0.9
0.9
0.6
0.4
0.1
0.3
0.6
0.6
0.3
0.1
0.1
0.4
04
0.3
0.0
(0.2)
(0.5)
(0.6)
(0.1)
(0.1)
0.1
0.5
0.9
0.7
0.8
1.0
1.0
1.2
1.2
1.4
1.3
16
1.6
1.5
1.7
1.8
1.6
1.8
1.8
2.0
2.0
2.0
2.0
2.0
2.0
2.3
2.1
2.1
2.4
2.4
2.2

30.0
13.6
11.8
9.2
8.5
66
6.6
6.9
6.7
6.6
5.0
4.0
3.6
3.4
3.7
2.3
1.4
1.4
1.8
1.4
0.8
0.8
0.9
1.2
1.1
0.7
0.8
0.6
0.4
0.8
0.7
0.9
0.8
0.9
0.8
0.8
0.5
0.3
0.0
0.2
0.5
0.5
0.2
0.0
0.0
0.3
03
0.2
(0.1)
(0.3)
(0.6)
(0.7)
(0.2)
(0.2)
0.0
0.4
0.8
0.7
0.7
0.9
0.9
1.1
1.2
1.4
1.2
16
1.6
1.5
1.6
1.8
1.6
1.8
1.8
2.0
1.9
2.0
2.0
2.0
2.0
2.3
2.0
2.1
2.3
2.3
2.1

(0.8)
3.7
3.1
3.8
25
2.5
3.4
3.8
4.0
2.5
1.7
1.5
1.4
1.9
0.6
(0.2)
(0.2)
0.3
(0.0)
(0.5)
(0.5)
(0.3)
0.0
(0.0)
(0.4)
(0.2)
(0.4)
(0.6)
(0.2)
(0.2)
0.0
(0.0)
0.1
0.0
0.0
(0.2)
(0.4)
(0.7)
(0.5)
(0.2)
(0.2)
(0.4)
(0.6)
(0.6)
(0.3)
(0 3)
(0.4)
(0.6)
(0.9)
(1.2)
(1.3)
(0.7)
(0.7)
(0.5)
(0.1)
0.3
0.2
0.3
0.5
0.5
0.7
0.8
1.0
0.8
12
1.2
1.1
1.3
1.4
1.2
1.4
1.4
1.6
1.6
1.6
1.7
1.6
1.7
2.0
1.7
1.8
2.0
2.0
1.8

8.3
5.1
5.3
33
3.3
4.3
4.6
4.7
3.0
2.0
1.7
1.6
2.1
0.7
(0.2)
(0.1)
0.4
0.0
(0.5)
(0.5)
(0.3)
0.1
0.0
(0.4)
(0.1)
(0.4)
(0.6)
(0.1)
(0.1)
0.1
(0.0)
0.1
0.0
0.0
(0.2)
(0.4)
(0.7)
(0.5)
(0.2)
(0.1)
(0.4)
(0.6)
(0.6)
(0.3)
(0 3)
(0.4)
(0.6)
(0.9)
(1.2)
(1.3)
(0.7)
(0.7)
(0.5)
(0.0)
0.3
0.2
0.3
0.5
0.5
0.7
0.8
1.0
0.8
12
1.2
1.1
1.3
1.4
1.2
1.5
1.5
1.6
1.6
1.7
1.7
1.7
1.7
2.0
1.7
1.8
2.1
2.1
1.9

1.9
3.9
17
1.7
3.3
3.8
4.1
2.2
1.2
1.0
1.0
1.6
0.1
(0.8)
(0.7)
(0.1)
(0.5)
(1.0)
(0.9)
(0.7)
(0.3)
(0.3)
(0.7)
(0.5)
(0.8)
(0.9)
(0.4)
(0.4)
(0.2)
(0.3)
(0.2)
(0.2)
(0.2)
(0.5)
(0.6)
(0.9)
(0.7)
(0.4)
(0.4)
(0.6)
(0.8)
(0.8)
(0.5)
(0 5)
(0.6)
(0.8)
(1.1)
(1.4)
(1.5)
(0.9)
(0.9)
(0.7)
(0.2)
0.2
0.1
0.1
0.4
0.4
0.6
0.7
0.9
0.7
11
1.1
1.0
1.2
1.3
1.1
1.4
1.4
1.6
1.5
1.6
1.6
1.6
1.6
1.9
1.7
1.7
2.0
2.0
1.8

5.9
16
1.6
3.8
4.3
4.5
2.3
1.2
0.9
0.9
1.6
(0.1)
(1.0)
(0.9)
(0.3)
(0.6)
(1.2)
(1.1)
(0.9)
(0.4)
(0.5)
(0.9)
(0.6)
(0.9)
(1.0)
(0.5)
(0.5)
(0.3)
(0.4)
(0.2)
(0.3)
(0.3)
(0.5)
(0.7)
(1.0)
(0.8)
(0.5)
(0.4)
(0.7)
(0.8)
(0.8)
(0.5)
(0 5)
(0.7)
(0.9)
(1.2)
(1.4)
(1.5)
(0.9)
(0.9)
(0.7)
(0.2)
0.2
0.0
0.1
0.3
0.3
0.6
0.7
0.9
0.7
11
1.1
1.0
1.2
1.3
1.1
1.3
1.4
1.5
1.5
1.6
1.6
1.6
1.6
1.9
1.6
1.7
2.0
2.0
1.8

(2.6)
(2
6)
2.8
3.8
4.2
1.6
0.4
0.2
0.2
1.1
(0.7)
(1.6)
(1.5)
(0.7)
(1.1)
(1.6)
(1.5)
(1.3)
(0.8)
(0.8)
(1.2)
(0.9)
(1.2)
(1.3)
(0.8)
(0.8)
(0.5)
(0.6)
(0.5)
(0.5)
(0.5)
(0.7)
(0.9)
(1.2)
(1.0)
(0.6)
(0.6)
(0.8)
(1.0)
(1.0)
(0.7)
(0 7)
(0.8)
(1.0)
(1.3)
(1.6)
(1.7)
(1.1)
(1.1)
(0.8)
(0.4)
0.1
(0.1)
0.0
0.2
0.2
0.5
0.6
0.8
0.6
10
1.0
0.9
1.1
1.3
1.1
1.3
1.3
1.5
1.5
1.5
1.6
1.5
1.6
1.9
1.6
1.7
1.9
1.9
1.7

8.5
7.2
6.5
2.6
1.0
0.7
0.7
1.6
(0.5)
(1.5)
(1.4)
(0.6)
(0.9)
(1.6)
(1.4)
(1.2)
(0.7)
(0.7)
(1.1)
(0.8)
(1.1)
(1.2)
(0.7)
(0.7)
(0.4)
(0.5)
(0.4)
(0.4)
(0.4)
(0.7)
(0.8)
(1.2)
(1.0)
(0.6)
(0.5)
(0.8)
(1.0)
(1.0)
(0.7)
(0 7)
(0.8)
(1.0)
(1.3)
(1.6)
(1.7)
(1.0)
(1.0)
(0.8)
(0.3)
0.1
(0.0)
0.1
0.3
0.3
0.5
0.6
0.8
0.7
10
1.0
1.0
1.2
1.3
1.1
1.3
1.4
1.5
1.5
1.6
1.6
1.6
1.6
1.9
1.7
1.7
2.0
2.0
1.8

5.9
5.6
0.8
(0.8)
(0.8)
(0.6)
0.6
(1.5)
(2.6)
(2.3)
(1.3)
(1.7)
(2.3)
(2.1)
(1.8)
(1.2)
(1.2)
(1.6)
(1.3)
(1.6)
(1.7)
(1.1)
(1.1)
(0.8)
(0.8)
(0.7)
(0.7)
(0.7)
(1.0)
(1.1)
(1.5)
(1.2)
(0.9)
(0.8)
(1.0)
(1.2)
(1.2)
(0.9)
(0 9)
(1.0)
(1.2)
(1.5)
(1.8)
(1.9)
(1.2)
(1.3)
(1.0)
(0.5)
(0.1)
(0.2)
(0.1)
0.1
0.1
0.4
0.5
0.7
0.5
09
0.9
0.8
1.0
1.2
1.0
1.2
1.3
1.4
1.4
1.5
1.5
1.5
1.5
1.8
1.6
1.6
1.9
1.9
1.7

5.2
(1.7)
(2.9)
(2.4)
(1.8)
(0.2)
(2.6)
(3.6)
(3.2)
(2.0)
(2.4)
(2.9)
(2.7)
(2.3)
(1.7)
(1.6)
(2.0)
(1.7)
(1.9)
(2.0)
(1.4)
(1.4)
(1.1)
(1.1)
(1.0)
(1.0)
(0.9)
(1.2)
(1.4)
(1.7)
(1.5)
(1.1)
(1.0)
(1.2)
(1.4)
(1.4)
(1.1)
(1 1)
(1.2)
(1.4)
(1.7)
(2.0)
(2.1)
(1.4)
(1.4)
(1.1)
(0.6)
(0.2)
(0.3)
(0.2)
0.0
0.0
0.3
0.4
0.6
0.4
08
0.8
0.8
1.0
1.1
0.9
1.2
1.2
1.4
1.4
1.4
1.5
1.4
1.5
1.8
1.5
1.6
1.9
1.9
1.6

(8.2)
(6.8)
(4.8)
(3.5)
(1.3)
(3.8)
(4.8)
(4.2)
(2.8)
(3.1)
(3.7)
(3.3)
(2.9)
(2.1)
(2.1)
(2.5)
(2.1)
(2.3)
(2.4)
(1.8)
(1.7)
(1.3)
(1.4)
(1.2)
(1.2)
(1.2)
(1.4)
(1.6)
(2.0)
(1.7)
(1.3)
(1.2)
(1.4)
(1.6)
(1.6)
(1.2)
(1 2)
(1.3)
(1.6)
(1.9)
(2.2)
(2.3)
(1.6)
(1.6)
(1.3)
(0.8)
(0.3)
(0.4)
(0.3)
(0.1)
(0.1)
0.2
0.3
0.5
0.3
08
0.8
0.7
0.9
1.1
0.9
1.1
1.1
1.3
1.3
1.4
1.4
1.4
1.4
1.7
1.4
1.5
1.8
1.8
1.6

(5.3)
(3.1)
(1.9)
0.5
(2.9)
(4.2)
(3.6)
(2.1)
(2.5)
(3.2)
(2.9)
(2.4)
(1.7)
(1.6)
(2.1)
(1.7)
(2.0)
(2.1)
(1.4)
(1.4)
(1.0)
(1.1)
(0.9)
(0.9)
(0.9)
(1.2)
(1.3)
(1.7)
(1.4)
(1.0)
(0.9)
(1.2)
(1.4)
(1.4)
(1.0)
(1 0)
(1.1)
(1.4)
(1.7)
(2.0)
(2.1)
(1.4)
(1.4)
(1.1)
(0.6)
(0.1)
(0.2)
(0.2)
0.1
0.1
0.4
0.5
0.7
0.5
09
0.9
0.9
1.1
1.2
1.0
1.3
1.3
1.5
1.5
1.5
1.6
1.5
1.6
1.9
1.6
1.7
2.0
2.0
1.7

(0.8)
(0.2)
2.5
(2.3)
(4.0)
(3.3)
(1.6)
(2.1)
(3.0)
(2.6)
(2.1)
(1.3)
(1.3)
(1.9)
(1.4)
(1.8)
(1.9)
(1.2)
(1.1)
(0.8)
(0.9)
(0.7)
(0.7)
(0.7)
(1.0)
(1.2)
(1.6)
(1.3)
(0.9)
(0.8)
(1.1)
(1.3)
(1.3)
(0.9)
(0 9)
(1.0)
(1.3)
(1.6)
(1.9)
(2.0)
(1.3)
(1.3)
(1.0)
(0.5)
0.0
(0.1)
(0.0)
0.2
0.2
0.5
0.6
0.8
0.6
11
1.1
1.0
1.2
1.3
1.1
1.4
1.4
1.6
1.6
1.6
1.7
1.6
1.7
2.0
1.7
1.8
2.1
2.1
1.8

0.5
4.2
(2.8)
(4.7)
(3.7)
(1.8)
(2.3)
(3.2)
(2.8)
(2.3)
(1.4)
(1.3)
(1.9)
(1.5)
(1.8)
(1.9)
(1.2)
(1.2)
(0.8)
(0.9)
(0.7)
(0.7)
(0.7)
(1.0)
(1.2)
(1.6)
(1.3)
(0.9)
(0.8)
(1.1)
(1.3)
(1.3)
(0.9)
(0 9)
(1.0)
(1.3)
(1.6)
(1.9)
(2.1)
(1.3)
(1.3)
(1.0)
(0.5)
0.0
(0.1)
(0.0)
0.2
0.2
0.5
0.6
0.9
0.7
11
1.1
1.0
1.2
1.4
1.2
1.4
1.4
1.6
1.6
1.7
1.7
1.7
1.7
2.0
1.7
1.8
2.1
2.1
1.9

8.1
(4.4) (15.4)
(6.4) (12.9) (10.4)
(4.8) (8.7) (5.2)
(2.2) (4.7) (0.8)
(2.8) (4.8) (2.0)
(3.7) (5.6) (3.5)
(3.2) (4.7) (2.8)
(2.6) (3.8) (2.0)
(1.6) (2.6) (0.9)
(1.5) (2.4) (0.9)
(2.1) (3.0) (1.7)
(1.6) (2.4) (1.1)
(2.0) (2.7) (1.6)
(2.1) (2.8) (1.8)
(1.3) (1.9) (0.9)
(1.3) (1.8) (0.8)
(0.9) (1.4) (0.4)
(0.9) (1.4) (0.5)
(0.7) (1.2) (0.3)
(0.8) (1.2) (0.4)
(0.7) (1.1) (0.4)
(1.1) (1.5) (0.8)
(1.3) (1.7) (1.0)
(1.7) (2.1) (1.5)
(1.4) (1.8) (1.1)
(0.9) (1.2) (0.6)
(0.8) (1.1) (0.5)
(1.1) (1.5) (0.9)
(1.4) (1.7) (1.1)
(1.3) (1.6) (1.1)
(0.9)
(0 9) (1.2)
(1 2) (0.7)
(0 7)
(1.1) (1.3) (0.9)
(1.3) (1.6) (1.2)
(1.7) (2.0) (1.5)
(2.0) (2.3) (1.9)
(2.1) (2.4) (2.0)
(1.3) (1.6) (1.2)
(1.4) (1.6) (1.2)
(1.1) (1.3) (0.9)
(0.5) (0.7) (0.3)
0.0 (0.2)
0.2
(0.1) (0.3)
0.1
(0.0) (0.2)
0.2
0.2
0.1
0.5
0.2
0.1
0.5
0.5
0.4
0.7
0.6
0.5
0.8
0.9
0.7
1.1
0.7
0.5
0.9
11
1.1
10
1.0
13
1.3
1.0
0.9
1.2
1.2
1.1
1.5
1.4
1.3
1.6
1.2
1.1
1.4
1.4
1.3
1.6
1.4
1.3
1.7
1.7
1.5
1.9
1.6
1.5
1.9
1.7
1.6
1.9
1.7
1.6
1.9
1.7
1.6
1.9
1.7
1.6
1.9
2.1
2.0
2.3
1.8
1.7
2.0
1.9
1.8
2.1
2.1
2.0
2.3
2.1
2.0
2.3
1.9
1.8
2.1

0.4
4.4
1.0
(1.7)
(1.2)
(0.6)
0.6
0.4
(0.7)
(0.1)
(0.7)
(1.0)
(0.1)
(0.1)
0.3
0.1
0.3
0.2
0.2
(0.3)
(0.5)
(1.0)
(0.7)
(0.2)
(0.1)
(0.5)
(0.8)
(0.8)
(0.4)
(0 4)
(0.5)
(0.8)
(1.2)
(1.6)
(1.7)
(0.9)
(0.9)
(0.6)
(0.0)
0.5
0.4
0.5
0.7
0.7
1.0
1.1
1.4
1.1
16
1.6
1.5
1.7
1.9
1.6
1.9
1.9
2.1
2.1
2.1
2.2
2.1
2.2
2.5
2.2
2.3
2.6
2.5
2.3

8.6
1.3
(2.3)
(1.6)
(0.8)
0.6
0.4
(0.8)
(0.2)
(0.8)
(1.1)
(0.1)
(0.1)
0.3
0.1
0.3
0.2
0.2
(0.3)
(0.5)
(1.1)
(0.8)
(0.2)
(0.1)
(0.6)
(0.8)
(0.8)
(0.4)
(0 4)
(0.5)
(0.9)
(1.3)
(1.7)
(1.8)
(0.9)
(1.0)
(0.6)
(0.0)
0.5
0.4
0.5
0.7
0.7
1.0
1.1
1.4
1.1
16
1.6
1.5
1.7
1.9
1.7
1.9
1.9
2.1
2.1
2.2
2.2
2.1
2.2
2.5
2.2
2.3
2.6
2.6
2.3

(5.5)
(7.4)
(4.9)
(3.0)
(0.9)
(0.9)
(2.1)
(1.2)
(1.8)
(2.0)
(0.9)
(0.8)
(0.3)
(0.5)
(0.2)
(0.3)
(0.3)
(0.8)
(1.0)
(1.6)
(1.2)
(0.6)
(0.5)
(0.9)
(1.2)
(1.2)
(0.7)
(0 7)
(0.9)
(1.2)
(1.6)
(2.0)
(2.1)
(1.2)
(1.2)
(0.9)
(0.2)
0.3
0.2
0.3
0.6
0.6
0.9
1.0
1.2
1.0
15
1.5
1.4
1.6
1.8
1.5
1.8
1.8
2.0
2.0
2.1
2.1
2.0
2.1
2.4
2.1
2.2
2.5
2.5
2.2

(9.2)
(4.5)
(2.1)
0.3
0.0
(1.5)
(0.6)
(1.4)
(1.7)
(0.4)
(0.4)
0.1
(0.1)
0.2
0.0
0.0
(0.5)
(0.8)
(1.3)
(1.0)
(0.4)
(0.3)
(0.7)
(1.0)
(1.0)
(0.5)
(0 5)
(0.7)
(1.0)
(1.5)
(1.9)
(2.0)
(1.1)
(1.1)
(0.8)
(0.1)
0.5
0.3
0.4
0.7
0.7
1.0
1.1
1.4
1.1
16
1.6
1.5
1.8
1.9
1.7
1.9
2.0
2.2
2.1
2.2
2.2
2.2
2.2
2.6
2.2
2.3
2.6
2.6
2.4

0.4
1.6
3.7
2.5
0.1
0.9
(0.2)
(0.7)
0.6
0.5
1.0
0.8
0.9
0.7
0.7
0.1
(0.2)
(0.9)
(0.5)
0.1
0.2
(0.3)
(0.6)
(0.6)
(0.1)
(0 1)
(0.3)
(0.7)
(1.2)
(1.6)
(1.7)
(0.8)
(0.8)
(0.5)
0.2
0.8
0.6
0.7
1.0
1.0
1.3
1.4
1.6
1.4
19
1.9
1.8
2.0
2.2
1.9
2.2
2.2
2.4
2.4
2.4
2.5
2.4
2.4
2.8
2.4
2.5
2.8
2.8
2.6

2.8
5.3
3.2
0.1
1.0
(0.3)
(0.8)
0.6
0.5
1.1
0.8
1.0
0.7
0.7
0.1
(0.3)
(1.0)
(0.6)
0.1
0.2
(0.3)
(0.7)
(0.7)
(0.2)
(0 2)
(0.4)
(0.8)
(1.2)
(1.7)
(1.8)
(0.8)
(0.9)
(0.5)
0.2
0.8
0.6
0.7
1.0
1.0
1.3
1.4
1.7
1.4
19
1.9
1.8
2.0
2.2
1.9
2.2
2.2
2.5
2.4
2.5
2.5
2.4
2.5
2.8
2.5
2.6
2.9
2.9
2.6

7.9
3.4
(0.8)
0.6
(0.9)
(1.4)
0.3
0.2
0.9
0.6
0.8
0.6
0.6
(0.1)
(0.5)
(1.2)
(0.8)
(0.1)
0.0
(0.5)
(0.8)
(0.8)
(0.3)
(0 3)
(0.5)
(0.9)
(1.4)
(1.8)
(2.0)
(1.0)
(1.0)
(0.6)
0.1
0.7
0.5
0.6
1.0
0.9
1.3
1.4
1.6
1.4
19
1.9
1.8
2.0
2.2
1.9
2.2
2.2
2.4
2.4
2.5
2.5
2.4
2.5
2.8
2.5
2.6
2.9
2.9
2.6

(1.0)
(4.9)
(1.7)
(3.0)
(3.2)
(0.9)
(0.8)
0.1
(0.2)
0.1
(0.1)
(0.0)
(0.7)
(1.0)
(1.8)
(1.3)
(0.5)
(0.4)
(0.9)
(1.2)
(1.2)
(0.7)
(0 7)
(0.8)
(1.3)
(1.7)
(2.2)
(2.3)
(1.3)
(1.3)
(0.9)
(0.1)
0.5
0.3
0.4
0.8
0.8
1.1
1.2
1.5
1.2
18
1.8
1.6
1.9
2.1
1.8
2.1
2.1
2.3
2.3
2.4
2.4
2.3
2.4
2.7
2.4
2.5
2.8
2.8
2.5

(8.7)
(2.1)
(3.6)
(3.7)
(0.9)
(0.8)
0.2
(0.1)
0.2
0.0
0.1
(0.7)
(1.1)
(1.8)
(1.3)
(0.5)
(0.4)
(0.9)
(1.3)
(1.2)
(0.6)
(0 6)
(0.8)
(1.3)
(1.8)
(2.2)
(2.4)
(1.3)
(1.3)
(0.9)
(0.1)
0.6
0.4
0.5
0.8
0.8
1.2
1.3
1.6
1.3
18
1.8
1.7
2.0
2.2
1.9
2.2
2.2
2.4
2.4
2.4
2.5
2.4
2.4
2.8
2.4
2.5
2.9
2.9
2.6

5.0
(1.0)
(2.0)
1.2
0.9
1.8
1.2
1.4
1.0
1.0
0.1
(0.4)
(1.3)
(0.8)
0.1
0.2
(0.4)
(0.8)
(0.8)
(0.2)
(0 2)
(0.4)
(0.9)
(1.4)
(2.0)
(2.1)
(1.0)
(1.0)
(0.6)
0.2
0.9
0.7
0.8
1.1
1.1
1.5
1.5
1.8
1.6
21
2.1
2.0
2.2
2.4
2.1
2.4
2.4
2.7
2.6
2.7
2.7
2.6
2.7
3.0
2.7
2.8
3.1
3.1
2.8

(6.7)
(5.3)
(0.0)
(0.1)
1.1
0.6
0.9
0.5
0.5
(0.4)
(0.9)
(1.8)
(1.2)
(0.3)
(0.1)
(0.8)
(1.2)
(1.1)
(0.5)
(0 5)
(0.7)
(1.2)
(1.7)
(2.2)
(2.4)
(1.2)
(1.2)
(0.8)
0.0
0.8
0.5
0.6
1.0
1.0
1.4
1.5
1.8
1.5
20
2.0
1.9
2.2
2.4
2.1
2.4
2.4
2.6
2.6
2.6
2.6
2.6
2.6
3.0
2.6
2.7
3.1
3.0
2.7

(3.9)
3.5
2.2
3.2
2.1
2.2
1.6
1.5
0.3
(0.3)
(1.3)
(0.7)
0.3
0.3
(0.4)
(0.8)
(0.8)
(0.1)
(0 1)
(0.4)
(0.9)
(1.5)
(2.0)
(2.2)
(1.0)
(1.0)
(0.6)
0.3
1.0
0.8
0.9
1.3
1.2
1.6
1.7
2.0
1.7
23
2.3
2.1
2.4
2.6
2.3
2.6
2.6
2.8
2.8
2.8
2.9
2.8
2.8
3.2
2.8
2.9
3.2
3.2
2.9

11.5
5.4
5.7
3.6
3.5
2.6
2.3
0.9
0.2
(1.1)
(0.4)
0.6
0.7
(0.1)
(0.6)
(0.6)
0.1
01
(0.2)
(0.7)
(1.4)
(2.0)
(2.1)
(0.9)
(0.9)
(0.4)
0.5
1.2
0.9
1.1
1.4
1.4
1.8
1.9
2.2
1.9
25
2.5
2.3
2.6
2.8
2.4
2.8
2.8
3.0
2.9
3.0
3.0
2.9
3.0
3.4
2.9
3.0
3.4
3.4
3.0

(0.4)
2.9
1.1
1.6
0.9
0.8
(0.6)
(1.2)
(2.4)
(1.5)
(0.3)
(0.2)
(0.9)
(1.4)
(1.4)
(0.6)
(0 6)
(0.8)
(1.4)
(2.0)
(2.6)
(2.7)
(1.4)
(1.4)
(0.9)
0.0
0.8
0.6
0.7
1.1
1.1
1.5
1.6
1.9
1.6
22
2.2
2.1
2.3
2.6
2.2
2.5
2.5
2.8
2.8
2.8
2.8
2.7
2.8
3.2
2.8
2.9
3.2
3.2
2.9

6.2
1.9
2.3
1.2
1.1
(0.6)
(1.3)
(2.6)
(1.7)
(0.3)
(0.1)
(1.0)
(1.5)
(1.4)
(0.6)
(0 6)
(0.9)
(1.4)
(2.1)
(2.7)
(2.8)
(1.4)
(1.4)
(0.9)
0.1
0.9
0.6
0.7
1.2
1.1
1.5
1.7
2.0
1.7
23
2.3
2.1
2.4
2.6
2.3
2.6
2.6
2.9
2.8
2.9
2.9
2.8
2.9
3.3
2.8
3.0
3.3
3.3
2.9

(2.3)
0.4
(0.4)
(0.2)
(1.9)
(2.5)
(3.8)
(2.6)
(1.0)
(0.8)
(1.6)
(2.1)
(2.0)
(1.1)
(1 1)
(1.3)
(1.9)
(2.6)
(3.2)
(3.3)
(1.8)
(1.8)
(1.2)
(0.2)
0.7
0.4
0.5
1.0
1.0
1.4
1.5
1.9
1.5
22
2.2
2.0
2.3
2.5
2.2
2.5
2.5
2.8
2.7
2.8
2.8
2.7
2.8
3.2
2.8
2.9
3.3
3.2
2.9

3.1
0.5
0.5
(1.8)
(2.5)
(4.1)
(2.7)
(0.9)
(0.6)
(1.6)
(2.1)
(2.0)
(1.0)
(1 0)
(1.3)
(1.9)
(2.6)
(3.2)
(3.4)
(1.8)
(1.8)
(1.2)
(0.1)
0.8
0.5
0.7
1.1
1.1
1.5
1.6
2.0
1.6
23
2.3
2.2
2.5
2.7
2.3
2.7
2.7
2.9
2.9
2.9
2.9
2.8
2.9
3.3
2.9
3.0
3.4
3.3
3.0

(2.0)
(0.8)
(3.4)
(3.9)
(5.5)
(3.6)
(1.4)
(1.0)
(2.1)
(2.6)
(2.4)
(1.3)
(1 3)
(1.6)
(2.2)
(2.9)
(3.6)
(3.7)
(2.0)
(2.0)
(1.4)
(0.3)
0.7
0.4
0.5
1.0
1.0
1.5
1.6
2.0
1.6
23
2.3
2.1
2.4
2.7
2.3
2.6
2.6
2.9
2.9
2.9
2.9
2.8
2.9
3.3
2.9
3.0
3.4
3.3
3.0

0.5
(4.1)
(4.5)
(6.3)
(3.9)
(1.3)
(0.9)
(2.1)
(2.7)
(2.5)
(1.2)
(1 2)
(1.5)
(2.2)
(3.0)
(3.7)
(3.8)
(2.0)
(2.0)
(1.4)
(0.2)
0.8
0.5
0.7
1.2
1.1
1.6
1.7
2.1
1.7
24
2.4
2.3
2.6
2.8
2.4
2.8
2.8
3.1
3.0
3.0
3.1
3.0
3.0
3.5
3.0
3.1
3.5
3.5
3.1

(8.4)
(6.9)
(8.5)
(5.0)
(1.7)
(1.1)
(2.4)
(3.0)
(2.8)
(1.4)
(1 4)
(1.7)
(2.5)
(3.3)
(4.0)
(4.1)
(2.2)
(2.1)
(1.5)
(0.2)
0.9
0.5
0.7
1.2
1.1
1.6
1.8
2.2
1.8
25
2.5
2.3
2.6
2.9
2.5
2.9
2.8
3.1
3.1
3.1
3.1
3.0
3.1
3.5
3.1
3.2
3.6
3.5
3.1

(5.4)
(8.5) (11.5)
(3.8) (2.9)
0.1
2.0
0.4
1.9
(1.4) (0.6)
(2.3) (1.7)
(2.1) (1.6)
(0.6)
(0 6)
0.0
00
(1.0) (0.5)
(1.9) (1.6)
(2.8) (2.6)
(3.7) (3.5)
(3.8) (3.7)
(1.8) (1.5)
(1.7) (1.5)
(1.0) (0.7)
0.3
0.6
1.4
1.8
1.0
1.3
1.1
1.5
1.6
2.0
1.6
1.9
2.1
2.4
2.2
2.5
2.6
2.9
2.2
2.5
29
2.9
32
3.2
2.7
3.0
3.0
3.3
3.3
3.6
2.8
3.1
3.2
3.5
3.2
3.5
3.5
3.8
3.4
3.7
3.4
3.7
3.5
3.7
3.3
3.6
3.4
3.6
3.9
4.1
3.3
3.6
3.5
3.7
3.9
4.1
3.8
4.0
3.4
3.6

6.4
9.5
6.8
2.4
0.4
0.2
1.8
18
0.9
(0.4)
(1.6)
(2.7)
(3.0)
(0.7)
(0.7)
0.0
1.4
2.6
2.1
2.2
2.7
2.6
3.1
3.2
3.6
3.1
39
3.9
3.6
3.9
4.1
3.6
4.0
4.0
4.3
4.2
4.2
4.2
4.0
4.1
4.5
4.0
4.1
4.5
4.4
4.0

12.6
7.0
1.1
(1.1)
(1.0)
1.1
11
0.2
(1.2)
(2.5)
(3.6)
(3.8)
(1.3)
(1.3)
(0.4)
1.1
2.4
1.8
2.0
2.5
2.4
3.0
3.0
3.5
2.9
38
3.8
3.5
3.8
4.1
3.5
3.9
3.9
4.2
4.1
4.1
4.1
4.0
4.0
4.5
3.9
4.0
4.4
4.4
3.9

1.6
(4.2)
(5.3)
(4.1)
(1.1)
(1 1)
(1.8)
(3.0)
(4.2)
(5.3)
(5.3)
(2.4)
(2.3)
(1.4)
0.3
1.7
1.2
1.4
2.0
1.9
2.5
2.6
3.1
2.5
34
3.4
3.1
3.5
3.8
3.2
3.7
3.6
3.9
3.8
3.9
3.9
3.7
3.8
4.3
3.7
3.8
4.2
4.2
3.7

(9.8)
(8.5)
(6.0)
(1.8)
(1 8)
(2.4)
(3.8)
(5.1)
(6.1)
(6.1)
(2.8)
(2.7)
(1.6)
0.2
1.7
1.2
1.4
2.0
1.9
2.5
2.7
3.1
2.6
35
3.5
3.2
3.6
3.8
3.3
3.7
3.7
4.0
3.9
3.9
3.9
3.8
3.8
4.4
3.8
3.9
4.3
4.2
3.8

(7.3)
(4.0)
1.1
11
(0.5)
(2.5)
(4.2)
(5.6)
(5.6)
(2.0)
(2.0)
(0.8)
1.1
2.7
2.0
2.1
2.8
2.7
3.3
3.4
3.8
3.2
41
4.1
3.8
4.2
4.4
3.8
4.3
4.2
4.5
4.4
4.4
4.4
4.2
4.3
4.8
4.2
4.3
4.7
4.6
4.2

(0.7)
5.5
55
1.9
(1.3)
(3.6)
(5.3)
(5.3)
(1.3)
(1.3)
(0.2)
1.9
3.5
2.8
2.9
3.5
3.3
3.9
4.0
4.4
3.8
47
4.7
4.3
4.7
5.0
4.3
4.7
4.7
5.0
4.8
4.8
4.8
4.6
4.6
5.2
4.5
4.6
5.0
5.0
4.5

12.0
12 0
3.1 (5.1)
(1.5) (7.7) (10.3)
(4.4) (9.3) (11.3) (12.3)
(6.2) (10.2) (11.9) (12.7) (13.0)
(6.1) (9.4) (10.4) (10.4) (9.5)
(1.4) (3.5) (3.2) (1.3)
2.6
(1.4) (3.2) (2.9) (1.4)
1.6
(0.1) (1.5) (1.0)
0.6
3.4
2.2
1.1
1.9
3.8
6.8
3.9
3.2
4.1
6.1
9.0
3.0
2.3
3.0
4.6
7.0
3.1
2.4
3.1
4.6
6.6
3.8
3.2
3.9
5.3
7.3
3.6
3.0
3.6
4.9
6.6
4.2
3.7
4.4
5.6
7.2
4.3
3.8
4.4
5.6
7.1
4.7
4.3
4.9
6.0
7.5
4.0
3.6
4.1
5.1
6.3
50
5.0
46
4.6
52
5.2
62
6.2
75
7.5
4.6
4.2
4.7
5.6
6.8
5.0
4.6
5.1
6.0
7.1
5.2
4.9
5.4
6.3
7.3
4.5
4.2
4.6
5.4
6.4
5.0
4.7
5.1
5.9
6.8
4.9
4.6
5.0
5.7
6.6
5.2
4.9
5.4
6.1
6.9
5.0
4.8
5.2
5.8
6.7
5.0
4.8
5.2
5.8
6.6
5.0
4.7
5.1
5.7
6.5
4.8
4.5
4.9
5.5
6.2
4.8
4.6
4.9
5.5
6.2
5.3
5.1
5.5
6.1
6.8
4.7
4.4
4.8
5.3
5.9
4.8
4.5
4.9
5.4
6.0
5.2
5.0
5.3
5.8
6.5
5.1
4.9
5.2
5.7
6.3
4.6
4.4
4.7
5.1
5.7

(5.7)
11.5
7.0
8.0
11.3
13.2
10.2
9.4
9.8
8.8
9.3
8.9
9.3
7.9
90
9.0
8.2
8.5
8.6
7.5
7.9
7.7
8.0
7.6
7.5
7.4
7.0
7.0
7.5
6.7
6.7
7.2
7.0
6.3

31.8
14.0
13.0
16.0
17.4
13.1
11.8
11.9
10.6
10.9
10.4
10.6
9.0
10 1
10.1
9.2
9.4
9.5
8.3
8.7
8.4
8.7
8.3
8.1
8.0
7.6
7.5
8.1
7.1
7.2
7.6
7.4
6.7

(1.5)
4.6
11.1
14.0
9.7
8.7
9.4
8.2
8.8
8.4
8.9
7.3
86
8.6
7.7
8.1
8.2
7.1
7.6
7.3
7.6
7.3
7.2
7.0
6.7
6.6
7.2
6.3
6.4
6.9
6.7
6.0

11.1
18.0
19.7
12.6
10.9
11.3
9.6
10.2
9.6
10.0
8.1
95
9.5
8.5
8.8
8.9
7.6
8.1
7.8
8.1
7.7
7.6
7.4
7.0
7.0
7.6
6.6
6.7
7.2
7.0
6.3

25.3
24.2
13.1
10.8
11.3
9.4
10.1
9.4
9.8
7.8
93
9.3
8.3
8.6
8.8
7.4
7.9
7.6
7.9
7.6
7.4
7.2
6.8
6.8
7.5
6.4
6.5
7.0
6.9
6.1

23.2
7.5
6.4
8.0
6.4
7.7
7.3
8.0
6.1
79
7.9
6.8
7.3
7.6
6.2
6.9
6.6
7.0
6.6
6.5
6.4
6.0
6.0
6.8
5.7
5.8
6.4
6.2
5.5

(6.2)
(1.1)
3.4
2.6
4.9
4.9
6.0
4.1
63
6.3
5.3
6.0
6.4
5.0
5.8
5.6
6.1
5.7
5.7
5.6
5.2
5.2
6.1
5.0
5.1
5.8
5.6
4.9

4.1
8.6
5.7
7.8
7.2
8.2
5.6
80
8.0
6.7
7.3
7.6
6.0
6.8
6.5
6.9
6.5
6.4
6.3
5.9
5.9
6.7
5.6
5.7
6.3
6.1
5.3

13.2
6.5
9.1
8.0
9.0
5.9
85
8.5
7.0
7.6
8.0
6.2
7.0
6.6
7.1
6.7
6.6
6.4
6.0
5.9
6.8
5.6
5.7
6.4
6.2
5.4

0.3
7.1
6.4
8.0
4.5
78
7.8
6.1
7.0
7.4
5.5
6.4
6.1
6.7
6.2
6.1
6.0
5.6
5.6
6.5
5.3
5.4
6.1
5.9
5.1

14.4
9.5
10.7
5.6
93
9.3
7.1
8.0
8.3
6.1
7.1
6.7
7.2
6.7
6.6
6.4
5.9
5.9
6.8
5.5
5.6
6.4
6.2
5.3

4.9
9.0
2.8
81
8.1
5.8
6.9
7.5
5.1
6.3
5.9
6.6
6.1
6.0
5.9
5.4
5.4
6.4
5.1
5.2
6.0
5.8
4.9

13.2
1.7
92
9.2
6.0
7.3
7.9
5.1
6.5
6.0
6.8
6.2
6.1
5.9
5.4
5.4
6.5
5.1
5.2
6.1
5.9
4.9

(8.6)
72
7.2
3.7
5.9
6.9
3.8
5.5
5.2
6.1
5.5
5.5
5.3
4.8
4.9
6.1
4.6
4.8
5.7
5.5
4.5

25 7
25.7
10.4
11.2
11.2
6.5
8.1
7.3
8.1
7.2
7.0
6.7
6.0
6.0
7.2
5.5
5.7
6.6
6.3
5.2

(3.1)
4.7
6.7
2.2
4.9
4.5
5.8
5.1
5.1
5.0
4.4
4.5
5.9
4.2
4.5
5.5
5.3
4.2

13.0
12.0
4.0
6.9
6.1
7.3
6.4
6.2
5.9
5.2
5.2
6.7
4.8
5.0
6.1
5.8
4.6

10.9
(0.2) (10.2)
5.0
2.2
4.4
2.3
6.2
5.1
5.3
4.2
5.2
4.3
5.1
4.3
4.4
3.6
4.4
3.7
6.1
5.7
4.1
3.5
4.4
3.9
5.6
5.2
5.4
5.0
4.1
3.7

16.2
9.2
10.7
8.1
7.5
6.9
5.7
5.6
7.6
5.0
5.3
6.6
6.3
4.8

1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

INVESTMENT FROM END YEAR

INVESTMENT FROM END YEAR

INVESTMENT FROM END YEAR

INVESTMENT TO END YEAR


IN

INVESTMENT TO END YEAR


AR

1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013

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