Small Cap Value and Commercial Paper HSWR
Posted: Fri Jul 16, 2004 12:47 pm
Here are some tables using Mike's data for the returns of Small Capitalization Value stocks. His data is for 1927-2003. I have used S&P500 data for 1921-1926 and the dummy data in our calculators for 2004-2010.
With 50% Small Cap Value stocks and 50% commercial paper, a plot of Historical Surviving Withdrawal Rates (HSWR, also known as Historical Database Rates) for 1921-1980 is fit with a line y = 0.3301x + 3.116 with an R-squared of 0.6936, where y is the Historical Surviving Withdrawal Rate and x is the percentage earnings yield 100E10/P. Data from 1926-1975 are fit with a line y = 0.3748x + 2.7804 with an R-square of 0.578.
With 80% Small Cap Value stocks and 20% commercial paper, a plot of Historical Surviving Withdrawal Rates for 1921-1980 is fit with a line y = 0.519x + 2.6862 with an R-squared of 0.6697. Data from 1926-1975 are fit with a line y = 0.7796x + 1.0006 with an R-squared of 0.7386.
In all cases, portfolios were rebalanced annually. The expenses were 0.20% of the current balance. Withdrawal rates are relative to the portfolio's initial balance. Withdrawal amounts were adjusted to match inflation as measured by CPI-U. The portfolio lifespans were 30 years. When withdrawals were made at a rate 0.1% higher than the Historical Surviving Withdrawal Rate, a portfolio would have failed within 30 years. When withdrawals were made at the Historical Surviving Withdrawal Rate, a portfolio would have survived for the entire 30-year period.
Have fun.
John R.
With 50% Small Cap Value stocks and 50% commercial paper, a plot of Historical Surviving Withdrawal Rates (HSWR, also known as Historical Database Rates) for 1921-1980 is fit with a line y = 0.3301x + 3.116 with an R-squared of 0.6936, where y is the Historical Surviving Withdrawal Rate and x is the percentage earnings yield 100E10/P. Data from 1926-1975 are fit with a line y = 0.3748x + 2.7804 with an R-square of 0.578.
With 80% Small Cap Value stocks and 20% commercial paper, a plot of Historical Surviving Withdrawal Rates for 1921-1980 is fit with a line y = 0.519x + 2.6862 with an R-squared of 0.6697. Data from 1926-1975 are fit with a line y = 0.7796x + 1.0006 with an R-squared of 0.7386.
In all cases, portfolios were rebalanced annually. The expenses were 0.20% of the current balance. Withdrawal rates are relative to the portfolio's initial balance. Withdrawal amounts were adjusted to match inflation as measured by CPI-U. The portfolio lifespans were 30 years. When withdrawals were made at a rate 0.1% higher than the Historical Surviving Withdrawal Rate, a portfolio would have failed within 30 years. When withdrawals were made at the Historical Surviving Withdrawal Rate, a portfolio would have survived for the entire 30-year period.
Have fun.
John R.