If there were such a thing as a received wisdom for investors, it would include the belief that equities always beat bonds as investment vehicles and that emerging markets offer better returns than those found in the big established markets. Two new studies question both of these assertions and suggest the case for re-examining some basic investment assumptions.
Let's start with bonds. Researchers at Deutsche Bank have looked at the performance of government bond markets since 1962 and found that three countries in the G7 group of leading industrialised nations issued bonds giving higher returns than those of parallel equity markets.
By far the worst performance by equities and the best by bonds came from the Italian market, which on an annualised basis saw stocks return an average negative 0.38 per cent, whereas bonds delivered a 2.64 per cent return.
Bonds performed even better in Germany during this period, delivering a 4.28 per cent return, while stocks managed only an average 3.46 per cent annual gain. Figures for Japan are similar, with bonds delivering 4.17 per cent and stocks 2.72 per cent.
Meanwhile, and more predictably, the four other G7 nations in this study saw equities easily outperform bonds. British government debt performed best among the G7 sovereign bonds, followed by the US, Canada and France - in that order.
So it is hardly axiomatic that bonds (which are supposed to offer lower returns and lower risk than equities) will always end up yielding less than equities. This may be, as Deutsche Bank acknowledges, because of the particular circumstances in which these three nations all suffered hyperinflation in the period under review.
It also suggests that another of investors' sacred cows, that markets operate efficiently in the long run, may also be flawed.