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I'm using the S&P 500 data provided by Robert Shiller which goes back to 1871.

I've then calculated the percent return for each month, the simple arithmetic average is 0.43%. Calculating the compound annual growth rate from 4.44 to 1550.83 over 1707 months results in 0.34%.

=(1550.83/4.44)^(1/(1707-1))-1

Both of these values are significantly below what I would expect of at least around 0.5%, which would be roughly 6% annually.

Am I doing a some calculations wrong? Is this data not appropriate? Is the notion of 6% long-term average for the stock market incorrect?

Edit: Another way from framing my question might be: how do I calculate the values shown at MoneyChimp on my own? I'm happy to use raw data other than the spreadsheet above.

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6%? The S&P should be 10.6% average, and a CAGR of 8.92%.

I'm guessing the data you are studying doesn't include dividends, which, in my opinion, is what makes using the index number for certain purposes a bad starting point.

See the Money Chimp site (bad name, great site) for the real numbers between any two years. MC uses the Shiller data as well, and sports a starting date of 1871. Welcome to Money.SE

EDIT - Dan and i exchanged emails. Shiller data is monthly, with the annual dividend number next to the S&P index for each month. One can take the Shiller data and manipulate to be a yearly series, or treat the dividend as 1/12 each month. Either way, the dividend should be taken into account.

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  • I added in dividends (column C in the spreadsheet, labeled Dividend), it didn't change the result. Where am I going wrong?
    – Ðаn
    Jun 9, 2013 at 23:16
  • see the "Robert Shiller" link above; thanks.
    – Ðаn
    Jun 9, 2013 at 23:22
  • I get a CAGR from 1871 to 2012 of 8.93. Chimp or I may have rounding issues, but nearly identical. I saw your email and replied.
    – JTP - Apologise to Monica ♦
    Jun 9, 2013 at 23:43
  • @Dan If you are projecting forward, just make sure to factor in P/E trends and falling dividend ratios as well!
    – JAGAnalyst
    Jun 17, 2013 at 17:18

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