Stocks, Bonds, Bills, and Inflation During the Twentieth Century in Denmark

Abstract

For each of the three major asset classes: stocks, bonds and treasury bills, this is the first article to present estimates of annual nominal and real returns for the Danish capital market during the whole twentieth century. The average annual Danish stock return in excess of bond (bill) return is 2.9 (3.9) percentage points. Contrary to most other countries hundred years of data for the Danish capital market is not sufficient to reject the hypothesis that the average annual stock return in excess of bond return ('the Danish equity risk premium relative to bonds') is zero at the 5% level of significance. For the same period and at the same level of significance I am (barely) able to reject the hypothesis that the average annual stock return in excess of the risk free interest rate ('the Danish equity risk premium relative to bills') is zero.