Australia fact of the day

by on August 15, 2010 at 1:53 am in Data Source, Economics, History | Permalink

Which country's stock market has been the best performer in the world — not just over the past year or decade, but over the last 110 years?

It's Australia, which stands above all others in its combination of higher returns and lower volatility.

While they speak our language, and we have some common origins, they have hitched their wagon to the dynamic growth of Asia. And it's paid off, as Australia has had the best performing stock market in the world from 1900 to 2009.

Australia posted 7.5% after-inflation returns per year during that time, with a standard deviation of 18.2%, according to a study from Credit Suisse. Those returns are the highest and the volatility the second lowest of the 19 major markets the researchers studied.

During that time, U.S. stocks made a 6.2% return, with a standard deviation of 20.4%. That means investors would have made more money in Australian stocks with less volatility than in the U.S. or any other major market over that long stretch.

The full story is here and hat tip goes to Ann Jessica Lien on Twitter.

Question: does this mean that Australia is really good, economically speaking, or simply not thought very much of by others?

1 Oz Ozzie August 15, 2010 at 2:28 am

Start from further behind, still catching up, lower population density per natural resource, further away form everything… We wouldn’t want to get up ourselves about it – though we probably will

2 Steve Sailer August 15, 2010 at 4:42 am

It’s the Lucky Country. Economically speaking, having a continent to yourself is nice, as Ben Franklin pointed out about America in 1751.

3 agnostic August 15, 2010 at 5:25 am

No Austro-Chinese mention?

If they have lower volatility, that just means that once their Black Swan arrives, it will be much more severe. What huge bubble could they be sitting on? From the end of the article, which most people probably didn’t get to:

‘ If China’s growth slows, “there doesn’t seem to be a backup plan.” ‘


4 athEIst August 15, 2010 at 9:21 am

While they speak our language

Strind isn’t English. If you say “strind” slowly you’ll realize it is how australians say australian.

5 athEIst August 15, 2010 at 9:33 am

The list cited above
doesn’t seem to include Great Britain. ???
Ireland is there but pre-1921 it was part of Great Britain and Ireland.

6 athEIst August 15, 2010 at 9:45 am

The 1820 list contains Germany and Italy, about 50 years too soon. And Bangladesh???

7 Andrew1 August 15, 2010 at 10:27 am

When you hear an American politician say “Only in American can you…”, just remember that in Australia you can probably do it too.

8 Adam's Myth August 15, 2010 at 12:18 pm

Australia has a very high average price to earnings ratio. This explains both the high historical returns (prices rising faster than fundamentals) and why you should not necessarily extrapolate.

9 Bazza August 15, 2010 at 5:12 pm

Let’s see what the graph looks like after the housing bubble collapses and the extraction trade with China slows. Also: water panic.

10 misterxroboto August 15, 2010 at 8:00 pm

[Question: does this mean that Australia is really good, economically speaking, or simply not thought very much of by others?]

not thought of. when they hitch their wagon to china, why would you not just invest in china?

it’s a key part of modern portfolio theory that you really want the source if you’re not able to get independent investments.

11 Andrew August 15, 2010 at 11:31 pm

The growth is mostly because Australia’s population has grown faster than most other developed countries.

The lower volatility might have something to do with Australians being quite cynical – there’s less scope for bubbles if no one believes the hype, and less scope for crashes.

The housing “bubble” here is mostly due to government land use policies, charges, and tardyness in bulding infrastructure. While governments make people pay for all local infrastructure as part of new land release prices, fails to build enough new infrastructure, and the populaiton keeps growing, the bubble won’t pop.

12 BKarn August 16, 2010 at 3:57 am

“Blimey mate, I had no flaming idea that you yanks came up with the lingo. Why did you call it English if it was invented in the US?”

“While they speak our language” means “While they speak the language we speak”. “Our” here does not represent a claim of creation or ownership. Aussies (and Brits) make these kinds of errors of interpretation constantly. It’s mystifying, and I suspect less a difference in the common language and more a conceit of bigotry about Americans.

13 Jesaulenko August 16, 2010 at 5:36 am

I didn’t realise China was looking for tonnes of debt and unemployment…

14 SJ August 16, 2010 at 7:10 am

The data is in the link that this post is about, which makes Jesaulenko’s nonsense doubly stupid.

15 doctorpat August 16, 2010 at 11:25 pm

The secret to Australia’s success is that we EXPECT black swans. It’s white swans that confuse us.

16 Chrisalex August 17, 2010 at 9:48 pm

It’s not ‘strind’, it’s pronounced ‘Strayan’

17 Andrew August 19, 2010 at 3:26 am

Innocent Bystander:
Inflation adjustment should take care of long term changes in currency. Maybe the exchange rate was temporarily unrepresentative at the start and end of the series, but if inflation is generally higher in one country over the period, then the exchange rate should have adjusted along with that inflation so that the same goods in both currencies aren’t 4x different in price. But even temporary exchange rate deviations at the start or end could make the comparison 1.5x-2.0x wrong – so 0.6% per annum over the period.

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