Data: The Risk and Reward of Investing

Abstract

We examine the risk and reward of investing by constructing a uniquely comprehensivemarket portfolio of $150 trillion worth of global assets that financial investors have investedin, spanning the period 1970-2022 at the monthly frequency. This monthly frequency allowsus to more accurately estimate the risks involved with investing. Even though the Sharperatio of the global market portfolio is not much higher than that of equities, it is much morestable over time. Moreover, drawdowns of the global market portfolio are less deep andshorter. When the market portfolio is expressed in other currencies than the U.S. dollar,risks of investing appear larger.</p