Study title

Until the 90s information on risk premiums based on empirical studies for the German capital market was only available sporadically and for short time horizons. Therefore a long term comparison of risk and return was not possible. Markus Morawietz investigates profitability and risk of German stock and bond investments since 1870. He takes inflation and tax issues into account. His work contains a comprehensive collection of primary data since 1870 on key figures on a monthly basis which describe the German capital market. The goal of the study is to identify empirical statements on parameters of the German capital market. Therefore the exposition of theoretical economic models is not of primary importance in this study. A special focus is on the potential applicability of existing Germen index numbers as base data on the empirical investigation. The first chapter “methodological bases of performance measurement” concludes with the definition of the term “performance”. The following hypothesis is tested within this study: “There is a risk premium on securities taking inflation and influences of taxes into account.” The test of this hypothesis is run over the longest time period possible. Therefore monthly data on stock and bond investment are subject of the investigation because they are the most actively traded assets. Furthermore a substitute for the risk-free investment was developed in order to determine the risk premium. Before the explicit performance measurement of the different assets takes place, empirical starting points for performance measurement will be defined. These starting points contain a relevant demarcation of the investigation period and a description of the historical events during the investigation periods for all periods. Hereby special consideration is given to the specific problems of long term German value series (interruption trough the First World War with the following Hyperinflation and the Second World War). The analysis of the...