The Anatomy of Capital Returns over the Very Long Run: Germany, 1465–2025

• Economics

Abstract: This paper for the first time reconstructs the weighted return on capital over centuries, on the basis of new archival data covering a substantial share (>70%) of the capital stock. The approach focuses on a single country for which the most nuanced decomposition can be obtained - including what arguably constitutes the most comprehensive real estate data, as well as the first-ever bond total return series for such a horizon. Across a range of data variations, the return on capital is moderately upwards sloping in both real and nominal terms (whether or not including cash components), typically fluctuated in a nominal range of 3-10%, and exhibits trend stationarity. The return on capital used to be strongly correlated with the macroeconomy - but especially since the 1800s, capital returns are gradually detaching from the business cycle - with the trend being most pronounced for sovereign assets.