The LazyPortfolioETF database has data dating back to 1871 for many assets and from 1927 for several others.
Clearly, the ETFs used to compose the portfolios did not exist during those periods (the first ETF was introduced in 1993).
So, how did we retrieve returns for periods when a particular ETF did not yet exist? For each ETF, in order to extend the historical data, we used, in order:
- Returns from equivalent ETFs.
- Returns from the benchmark/index replicated by the ETF, or from equivalent Index Funds
- Edu Websites providing this kind of information (Yale Department of Economic – Dr. Robert Shiller online data, NYU Stern, Officialdata.org)
- Private well know websites providing spread datasources (EarlyRetirementNow, ThePoorSwiss)
- Symba SpreadSheet, maintained by Bogleheads Forum
For the updated data, we retrieve quotes from listed ETFs.
If you believe that the data in our possession contains errors or if you have information on periods not covered (for some assets, we lack data before 1970-1985), please contact us through our LinkedIn page.
EUR Currency
Following the same logic, for ETFs in Euro currency, we used the benchmark for the periods when ETFs did not yet exist. In cases where the benchmark was in dollars, we calculated the monthly exchange rate to Euro.
But how did we derive the EUR/EUR exchange rate before 2002, the year the Euro came into actual use?
Before the Euro, there was a pre-existing unit of account: the ECU (European Currency Unit). It was a basket of EU member currencies and served as the precursor to the Euro. The currency basket to which the ECU was equated was last fixed on September 21, 1989, as follows (ISO Currency, Value, Weight%):
- BEF – Belgian Francs – 3.301 (8.183%)
- DEM – German Marks – 0.6242 (31.915%)
- DKK – Danish Krones – 0.1976 (2.653%)
- ESP – Spanish Peseta – 6.885 (4.138%)
- FRF – French Francs – 1.332 (20.306%)
- GBP – British Pounds – 0.08784 (12.452%) – GBP was part of the ECU basket but not part of the Euro
- GRD – Greek Drachmas – 1.44 (0.437%)
- IEP – Irish Punts – 0.008552 (1.086%)
- ITL – Italian Lira – 151.8 (7.840%)
- LUF – Luxembourg Francs – 0.13 (0.322%)
- NLG – Dutch Guilders – 0.2198 (9.87%)
- PTE – Portugese Escudos – 1.393 (0.695%)
On December 31, 1998, the ECU ceased to exist. According to the weight above, it’s possible to compute theoretical Euro rates before January 1, 1999 . The Euro debuted in financial markets in 1999, while actual currency circulation began on January 1, 2002. The Euro came into use in 2002.
In addition to exchange rates, we accounted for historical interest rates to refine our calculations for currency-hedged returns. Up to 1998, German interest rates were used. For the subsequent periods, we applied EU interest rates, corresponding to the period after the Euro was adopted as the common currency.
With the same logic, we calculated the EUR inflation rate. Before 1999, the Germany CPI was used (FRED website). Wherever data was not readily available, we utilized the discount rate to fill in the gaps.
This approach ensures that our backtesting feature remains robust and reliable, providing you with the most accurate insights possible. Although the theoretical returns are not based on actual market data, they are grounded in realistic assumptions and methodologies. This allows for comprehensive simulations over much longer periods, offering valuable insights and a strong basis for informed decision-making.
Historical information was taken by Wikipedia.
