After little more than 40 years of modern stock indices, the Norwegian stock market has increased investors’ wealth by a factor of more than 100 – and passed what was once considered a fantasy level.
If you’re a Norwegian investor with some experience, you may remember the previous benchmark totalindeksen (TOTX). It started its life at the outset of 1983 and was officially retired on 28 December 2001. Since then, no one has heard from it.
However, I have chained the old figures with new quotes for the all-share index OSEAX, which, like its predecessor, is not adjusted for free float (as opposed to the more commonly used OSEBX benchmark). It also deviated little from the TOTX in the six years they were calculated in parallel. I believe the chained figures paint a good picture of where the TOTX would stand today.
Here, then, is a novel piece of stock market news: This autumn, the TOTX passed the “magic” threshold of 10,000. On 24 November, it hit an all-time high of just over 10,578. Measured in this way, the Norwegian stock market has delivered a hundredfold appreciation since the start in 1983 – and almost tenfold since the last TOTX quote in 2001, at 1107.1.
Over these almost 41 years, this computes to an average annual return of 12.0 per cent, or an 8.6 per cent real rate if we adjust for inflation. I don’t think anyone will complain about that – although many people probably complained so much along the way that they didn’t last the whole of this fantastic journey.
True, this was probably a particularly good period in global securities markets, with falling interest rates for long periods of time and increased globalisation. Although a good part of the fall in interest rates has now been reversed, we cannot expect the same returns over the next four decades.
But did anyone do so at the end of 1982?
About the author
Finn Øystein Bergh joined Pareto in 2010, the first years in Pareto AS before joining Pareto Asset Management in 2015. He has previous experience as a journalist, chief economist and later managing editor in the financial magazine Kapital. Finn Øystein Bergh holds an MSc in Economics and Business Administration, MBA, cand. polit. (an extended master's degree) in political science and cand.polit. in economics. He writes the financial blog Paretos optimale, and has published several books on economics.