Historical Returns of the Market Portfolio

Robeco

Ronald Doeswijk

Research

51 Pages

This paper reconstructs the global market portfolio from 1960 through 2015, tracking returns across equities, real estate, and bonds to examine how the average investor actually performed. The findings challenge passive orthodoxy, showing simple heuristic allocations often delivered stronger risk adjusted outcomes despite the portfolio’s broad diversification.

Key Takeaways

Real Return Gap: The global market portfolio generated 4.38% compounded real returns from 1960 to 2015, versus 1.10% for Treasury bills.
Inflation Regime Shift: Real returns averaged 2.27% during 1960–1979 inflationary years but climbed to 5.57% after 1980 as disinflation reshaped asset performance.
Diversification Limits: The market portfolio posted an 11.5% standard deviation, yet heuristic allocations achieved materially better reward for risk across the 56 year sample.
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