Stocks For The Long Run - Overview

Overview

Siegel is a professor of finance at the Wharton School of the University of Pennsylvania and a contributor to financial publications like The Wall Street Journal, Barron's, The New York Times, and the Financial Times.

The book takes a long-term view of the financial markets, starting in 1802, mainly in the United States (but with some comparisons to other financial markets as well). Siegel takes an empirical perspective in answering investing questions.

Even though the book has been termed "the buy and hold Bible", the author occasionally concedes that there are market inefficiencies that can be exploited.

Siegel argues that stocks have returned an average of 6.5 percent to 7 percent per year after inflation over the last 200 years. He expects returns to be somewhat lower in the next couple of decades. In an article presented at the Equity Risk Premium forum of November 8, 2001, Siegel states:

An analysis of the historical relationships among real stock returns, P/Es, earnings growth, and dividend yields and an awareness of the biases justify a future P/E of 20 to 25, an economic growth rate of 3 percent, expected real returns for equities of 4.5–5.5 percent, and an equity risk premium of 2 percent (200 bps).