Blame WWII, But Emerging Markets Have Underperformed Since 1900

(Bloomberg) -- Investors who put their money in emerging-market equities back in 1900 have failed to match the returns of their counterparts in advanced economies, according to a Credit Suisse-backed study by London Business School.

One dollar invested in developed markets in 1900 was worth $11,821 by last year, compared with just $3,745 in emerging markets, the Credit Suisse Global Investment Returns Yearbook 2019 showed.

Investors can blame World War II and the Chinese revolution. From 1945 to 1949 equities lost 98 percent of their value in Japan, which wasn’t classified as a developed market until 1967, while their counterparts in China were all but wiped out financially by the upheaval of 1949. It’s a different story since 1950 though, since when emerging markets have generated annual returns of 11.7 percent, compared with 10.5 percent for advanced economies.

Emerging market stocks could pay investors around half a percentage point more than advanced market stocks in the next decades thanks to their higher risk profile, Paul Marsh, emeritus professor of finance at London Business School and one of the authors of the study, said at a press conference in London.

©2019 Bloomberg L.P.