Emerging markets equity has delivered an annualized 3.4 percentage points more than Treasuries since 1900 to U.S. investors, 90 basis points less than that of developed markets equities, according to research by the Credit Suisse Research Institute and London Business School.
The latest Credit Suisse Global Investment Returns Yearbook 2014 looks back at stock markets and emerging markets investment performance over the past 114 years.
According to a news release accompanying the 15th annual yearbook, Credit Suisse said the report authors — Elroy Dimson, Paul Marsh and Mike Staunton of London Business School — found that emerging markets underperformance can be traced back to the 1940s. However, they expect “superior returns in the future, in line with the higher risk of emerging markets.”
The authors also examined the volatility of emerging markets and how it evolves over time, according to an article in the yearbook. Taking 50 countries — 21 developed and 29 emerging — they found that as of Dec. 31, 1980, the average annualized volatility of emerging equity markets was 40%. By year-end 2013, it had fallen to 27%.
Compared with developed equity markets, emerging equity markets were almost twice as volatile at a ratio of 1.9. That dropped to just 10% as volatile by the end of 2013.