hocus2004
I still would like to know the 30-year numbers. I presume that they are higher than the 15-year numbers. I believe that it would be helpful to compare the 15-year numbers with the 30-year numbers, and also to consider the relationship between the 30-year return numbers and the 30-year SWR numbers.
I already have the answers for 50-year returns. I do not have them yet for 30-year returns.
I had already made graphs for 1923-1952 and 1871-1952 50-year returns versus the percentage earnings yield 100E10/P. I had Excel fit each graph with a straight line.
With 50-year periods and excluding all sequences with dummy data, only 1923-1952 results are available for making a curve fit if we stay within the modern era. The formula is y = 0.3228x+4.0934, the variation in the data looks like plus and minus 1% and R-squared is 0.4719, which is good. In terms of P/E10, the equation is y = [32.28 / (P/E10)]+4.0934.
If we use 1871-1952 results, the formula is y = 0.2788x+4.3637, the variation in the data is a little bit less than plus and minus 2% and R-squared is 0.6094, which is surprisingly good. In terms of P/E10, the equation is y = [27.88 / (P/E10)]+4.3637.
Once again, I looked up the values of P/E10 from the post
Calculated Rates of the Last Decade dated Wednesday, Jun 23, 2004.
http://nofeeboards.com/boards/viewtopic.php?t=2657
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1995 20.219819
1996 24.763281
1997 28.333753
1998 32.860928
1999 40.578255
2000 43.774387
2001 36.98056
2002 30.277409
2003 22.894158
The last entry in Professor Shiller's list is for November 2003. The S&P500 index was at 1054.87 and P/E10 was 25.898702. [To help with scaling: today's the S&P500 index started at 1134.41. If ten-year earnings were the same as in November 2003, today's P/E10 would be 25.898702*(1134.41/1054.87) = 27.851533.]
I used the 1871-1952 results in the following table. The formula is y = [27.88 / (P/E10)]+4.3637 and the confidence limits are plus and minus 2%.
Year, 1871-1952 Calculated 50-Year Return, Lower Confidence Limit, Upper Confidence Limit
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1995 5.74 3.74 7.74
1996 5.49 3.49 7.49
1997 5.35 3.35 7.35
1998 5.21 3.21 7.21
1999 5.05 3.05 7.05
2000 5.00 3.00 7.00
2001 5.12 3.12 7.12
2002 5.28 3.28 7.28
2003 5.58 3.58 7.58
Today's value would be only slightly more than that of 1997. It would be less than that of 1996.
I prefer to use the 1871-1952 data set because of the number of data points. It is necessary to verify that the numbers from the earlier era are still representative in the modern era. [There is an addition issue about the amount of scatter. I am satisfied to use the wider range of variation associated with the 1871-1952 data.]
Here are 50-Year Calculated Returns based on 1923-1952. I have excluded the confidence limits from this table because of the limited number of data points. The formula is y = [32.28 / (P/E10)]+4.0934 [and the confidence limits are at least plus and minus 1% but no wider than plus and minus 2%].
Year, 1923-1952 Calculated 50-Year Return
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1995 5.69
1996 5.40
1997 5.23
1998 5.08
1999 4.89
2000 4.83
2001 4.97
2002 5.16
2003 5.50
Once again, today's value would be only slightly more than that of 1997. It would be less than that of 1996.
The two sets of calculated returns are similar. The calculated returns based on 1923-1952 data vary from 4.83% in 2000 to 5.69% in 1995. The calculated returns based on 1871-1952 data vary from 5.00% in 2000 to 5.74% in 1995.
Have fun.
John R.