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A Look at the Callan Periodic Table of Investment Returns
By JLP | January 12, 2007
The newly-updated Callan Periodic Table of Investment Returns(PDF) is out. I LOVE this thing! I spent most of last night “analyzing” the table. I took the data and rearranged it different ways to see if there’s a different way to look at the information and to see if there is any sort of pattern that can be gleened from this table.
As you can see from the table, the various indexes are ranked annually according to their performance. The best-performing index is at the top and the worst-performing index is at the bottom. Callan has also color-coded each index to make it easier to find on the chart. This is what makes the chart interesting. Take a second and look at the chart. What do you see? The first thing that popped into my mind was how random the chart looks. There’s no pattern to detect. In other words, the chart offers no predictive power because there’s no pattern to the past. Just to prove it, I arranged the data in a different format. I took each index and counted the number of times it ranked in each place and came up with the following table:
This tells us that the MSCI EAFE index performed the best in 5 out of the 20 years (it also performed the worst in 7 out of 20 years). Notice, with a couple of exceptions, how evenly spread out the numbers are.
Finally, I arranged the data by index and their returns for each year along with their Geometric Average (or CAGR also known as the Compound Annual Growth Rate). The “worst” performer of the group was the Lehman Aggregate Bond index. That really should be no surprise. What is a surprise to me is how poorly the Russell 200o Growth Index and the MSCI EAFE Index performed over the 20-year period. They barely beat the bond index and had a lot more volatility.
All of this information is about the performance of each individual index. I’m going to follow this post up with some analysis of how these indexes would have worked together as a portfolio. So don’t fret, there’s more excitement to come!
Topics: Index Funds, Investing |