RT Journal Article
SR Electronic
T1 Expectations about Real Returns
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 45
OP 52
DO 10.3905/jpm.1999.319731
VO 25
IS 2
A1 Charles P. Jones
A1 Jack W. Wilson
YR 1999
UL https://pm-research.com/content/25/2/45.abstract
AB In this article, the authors provide empirical evidence concerning real returns for stocks and bonds in order to consider their impact on spending rules for large portfolios. Their analysis of the data supports the argument that 5% (or higher) real returns are not sustainable in the long run. Therefore, an endowment fund that is invested in equities, spends 5% a year, and earns the real return on stocks will, in all likelihood, see its market value decline below the beginning value at some point, absent new contributions. The actual record, shown in the article from probability standpoint, could lead institutional investors in particular to reformulate their expectations about real returns, and may also influence individual investors' expectations about future real returns.