New Zealand long-term equity returns and their determinants

Abstract

We document several aspects of New Zealand's long-term equity returns over the 156 years from 1867 to 2022. Remaining invested in the market has been an effective strategy. Investors with a 5-year (20-year) horizon lost money just 10% (<1%) of the time in nominal terms. Equities outperformed bonds in periods of moderate and high inflation, although bonds generated superior returns in deflationary periods. Returns over 5- and 10-year horizons can be predicted with a three-component model based on the “Buffett indicator”.