CFA Institute Study Examines a Century of US Stock and Bond Returns
A new CFA Institute study by Roger G. Ibbotson analyzes a century of US stock and bond returns, revealing that 97% of long-term large-cap equity returns stem from reinvested dividends.
A comprehensive new study by the CFA Institute, authored by financial researcher Roger G. Ibbotson, examines how wealth is generated and accumulated in stock and bond markets over long periods. Titled "Exponential Wealth: Centuries of Stock and Bond Returns," the research draws on historical data to extend capital market performance analysis far beyond standard multi-year or multi-decade timeframes.
A Century of US Market Performance
The study analyzes US capital markets between 1926 and 2025, presenting 100-year return figures for stocks and bonds. According to the data, the average annual return on US large-cap stocks during this century-long period stood at 10.1%, while the average annual return on US government bonds reached 4.9%.
One of the study's most striking findings highlights the cumulative impact of long-term investing. According to the CFA Institute, $1 invested in large US stocks in 1926 grew to $14,751 by 2025. Meanwhile, an investment of $1 in small US stocks over the same period ballooned to $32,425.
These numbers reflect the compounding power of returns over decades, specifically the effect of compound interest. The research emphasizes that total return encompasses more than just share price appreciation, incorporating dividend income and its continuous reinvestment over time.
"Looking at capital markets over extended periods allows us to better understand the relationship between time, risk, and compound interest in wealth creation," notes Eran Peleg, CFA, investment strategist and board member of CFA Society Israel.
Dividends, Concentration, and Historical Shifts
For large US stocks between 1926 and 2025, approximately 97% of the total return is attributed to dividends and their reinvestment, whereas stock price appreciation accounted for only about 3% of the overall return during the examined timeframe.
The paper also notes that equities have not always outperformed bonds. Historical data reveals extended periods—particularly during 19th-century deflationary cycles—when bonds generated higher yields than stocks. Significant shifts also occurred within the past century, as bonds underperformed until 1981 before benefiting from a prolonged declining interest rate environment.
Addressing modern market structures, the data shows that the 25 largest US companies currently account for roughly 50% of total US market capitalization—a concentration level unseen since the 1930s. The publication spans nearly 400 pages of historical analysis, marking the 50th anniversary of Ibbotson's original SBBI research while introducing the new Ibbotson Equity and Bond Indices series.
