The Spanish equity market has offered a nominal annual return of 8.3% over 120 years, according to an article published by “The Economic History Review”, the longest-term study written to date.
The study was conducted by professors Stefano Battilossi and Stefan Houpt of Carlos III University and Miguel Artola of the Autonomous University, both in Madrid. The authors recreated an index from 1900 to 1987 to link it from that date to the historical series of the IBEX 35.
The analysis indicates that dividends contributed 56% of total returns, while taxes would have subtracted 0.5 percentage points from this return.
Another conclusion of the article is that the stock market has functioned as an accurate barometer of events in Spain. Stock market performance has mirrored the country's economic modernization, “showing how institutional strength and stability are key to long-term investment success.” Stock prices were strongly procyclical in the “roaring twenties,” after the end of autarky in the postwar period (1950-1974), and during the growth driven by convergence with Europe (1985-2008). On the other hand, they recorded slow or even negative growth during the Great Depression, the stagflation of the 1970s and 1980s, and the Great Recession following the banking debt crisis (2008-2012).
The report concludes with a clear historical lesson: “Institutional strength, macroeconomic discipline, and openness to international capital are the pillars of sustained equity growth and investor confidence.”