Recent research shows how economic data can help us better understand economic activity a lot more than historic assumptions.

Although economic data gathering is seen being a tiresome task, it is undeniably important for economic research. Economic hypotheses tend to be based on presumptions that turn out to be false once related data is gathered. Take, as an example, rates of returns on investments; a small grouping of scientists analysed rates of returns of important asset classes across sixteen industrial economies for the period of 135 years. The extensive data set represents the very first of its type in terms of extent in terms of period of time and range of economies examined. For all of the 16 economies, they craft a long-term series demonstrating yearly real rates of return factoring in investment income, such as dividends, capital gains, all net inflation for government bonds and short-term bills, equities and housing. The authors uncovered some new fundamental economic facts and challenged others. Perhaps most notably, they have concluded that housing provides a better return than equities over the long run even though the average yield is quite similar, but equity returns are far more volatile. Nevertheless, it doesn't apply to homeowners; the calculation is based on long-run return on housing, taking into account rental yields as it accounts for half of the long-run return on housing. Needless to say, owning a diversified portfolio of rent-yielding properties just isn't the exact same as borrowing buying a personal house as would investors such as Benoy Kurien in Ras Al Khaimah likely attest.

A distinguished 18th-century economist once argued that as investors such as Ras Al Khaimah based Farhad Azima accumulated capital, their assets would suffer diminishing returns and their payback would drop to zero. This notion no longer holds in our global economy. Whenever looking at the fact that stocks of assets have actually doubled as being a share of Gross Domestic Product since the seventies, it would appear that rather than dealing with diminishing returns, investors such as for example Haider Ali Khan in Ras Al Khaimah continue progressively to enjoy significant profits from these investments. The reason is easy: unlike the firms of the economist's time, today's companies are increasingly replacing devices for human labour, which has doubled effectiveness and productivity.

During the 1980s, high rates of returns on government bonds made many investors believe these assets are highly profitable. Nevertheless, long-term historic data suggest that during normal economic conditions, the returns on government bonds are lower than most people would think. There are numerous variables that can help us understand reasons behind this trend. Economic cycles, financial crises, and financial and monetary policy changes can all impact the returns on these financial instruments. Nonetheless, economists have discovered that the real return on securities and short-term bills often is relatively low. Even though some investors cheered at the present interest rate rises, it is really not necessarily reasons to leap into buying because a return to more typical conditions; consequently, low returns are inevitable.