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New research provides an unprecedented 90 year view of Australian equities

Vanguard | 01 December 2016


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Vanguard Australia today partnered with the Australian Centre for Financial Studies (ACFS) to launch the Australian Equities Database, a unique source of performance information on the Australian sharemarket.

Vanguard Australia today partnered with the Australian Centre for Financial Studies (ACFS) to launch the Australian Equities Database, a unique source of performance information on the Australian sharemarket.

Stretching back to 1926, much of the data was previously held in disparate shares exchange gazettes and company reports. For the first time Australia's investment community is being offered a detailed view of long-term share market performance.

The data series within the AED was painstakingly compiled and verified by Research Fellow John Fowler, who has been with the ACFS since its inception in 2005, following a long career in corporate finance, culminating in roles as Chief Finance Officer of Carlton & United Breweries and subsequently Fosters Asia.

ACFS Research Director, Professor Kevin Davis, has completed preliminary research using the AED, providing insights into the evolution of the Australian equities market over the past 90 years.

"Historical data can't help us predict the future when it comes to sharemarkets, but it can help us understand what is happening now and why," Professor Davis said.

"Whether examining how the makeup of the market has changed over the years, how volatility has manifested through various market cycles or the evolution of P/E ratios and dividend payouts, the Australian Equities Database offers an unprecedented view of long-term performance to better shape our understanding of the local sharemarket.

"One key lesson from the database that is particularly relevant to investors today is that periods of sustained low yields are not uncommon. In fact, the period of relatively high growth from the early 1970s up to the early 2000s, where sharemarket returns powered into double digits, appears to have been an anomaly when viewed in a longer context, prompting us to consider whether the low return, low inflation environment of today is more structural, more long-term.

"In this sense, we can look for patterns and signposts within the AED that might help us to identify the underlying reasons for sharemarket performance and better educate investors and financial services professionals about how to conceptualise those market forces."

Vanguard's Head of Market Strategy Robin Bowerman highlighted the lessons investors can learn from this long-range data.

"Investors are constantly reminded that past performance is not an indication of future performance, but the past can provide valuable insight and perspective, especially over the long time period represented by this database," Mr Bowerman said.

"Being able to have a long-term perspective is one of the most powerful traits an investor can have. This can give them the patience and discipline needed to weather market ups and downs without panicking. The Australian Equities Database will certainly prove valuable in being able to help provide that perspective.

"For instance, the database shows that $100 invested in the ASX Accumulation Index in 1926 would today be worth $562,564 in nominal returns. This is a powerful demonstration of patient money providing healthy returns, which is something all investors, especially from a superannuation perspective, should appreciate.

"However the story told through the Australian Equities Database also shows periods of extreme volatility at various points throughout the 90-year span, further highlighting the value of diversification across asset classes like fixed income and international equities."

The Australian Equities database is expected to be of use in a wide range of research and analysis by the likes of fund managers, analysts, investors, corporate finance professionals and academic researchers.

Insights the database will be able to offer include enhanced long-term analysis of factors driving earnings and value growth, the ability to more thoroughly test portfolios and investment strategies, and help to better understand Australian market behaviour across economic market cycles, among many other possible uses.

The ACFS is finalising hosting arrangements that will provide online access to the Australian Equities Database for research purposes.

More information on the Australian Centre for Financial Studies is available at http://australiancentre.com.au