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Brief History of World Real Returns, 1900-2014


This article is based on the Credit Suisse Global Investment Returns Yearbook 2015, presenting the annual returns on stocks, bonds and bills for 23 countries, from 1900 to 2014, measured on USD.

Let’s start by showing the relative market capitalization of world equity markets on the base date of end-1989, and then compare it to the one on the base date of end-2014. Markets which were not included in the dataset are colored black.

Relative sizes of world stock markets, end-1899

Relative sizes of world stock markets 1899

Relative sizes of world stock markets, end-2014

Relative sizes of world stock markets 2014

Next, two charts will be presented for each country or region with an unbroken history.

The upper chart reports the cumulative real value of an initial investment in equities, long-term government bonds, and Treasury bills, with income reinvested for the last 115 years.

The middle chart reports the annualized real returns on equities, bonds, and bills over this century, the last 50 years, and since 1900.

The countries comprise two North American nations (Canada and the USA), ten Eurozone states (Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal, and Spain), six European markets that are outside the euro area (Denmark, Norway, Russia, Sweden, Switzerland, and the UK), four Asia-Pacific countries (Australia, China, Japan and New Zealand), and one African market (South Africa). These countries covered 98% of the global stock market in 1900 and 91% of its market capitalization by the start of 2015.



Often described as “The Lucky Country”, due to its richness in natural resources, weather, and distance from the problems elsewhere in the world (on an increasingly interconnected world, though), Australia has been the second-best performing equity market over the 115 years since 1900, with a real return of 7.3% per year.

 The Australian Securities Exchange (ASX) has its origins in six separate exchanges, established as early as 1861 in Melbourne and 1871 in Sydney, well before the federation of the Australian colonies formed the Commonwealth of Australia in 1901. The ASX ranks among the world’s top ten stock exchanges by value and turnover. Half the index is represented by banks (35%) and mining (11%), while the largest stocks at the start of 2015 are BHP Billiton, Commonwealth Bank of Australia, National Australia Bank, Australia & New Zealand Banking Group, and Westpac Banking Corporation.

Australia also has a significant government and corporate bond market, and is home to the largest financial futures and options exchange in the Asia-Pacific region.




The Austrian Empire was re-formed in the 19th century into Austria-Hungary, which, by 1900, was the second largest country in Europe. It comprised modern-day Austria, Bosnia-Herzegovina, Croatia, Czech Republic, Hungary, Slovakia, Slovenia; large parts of Romania and Serbia; and small parts of Italy, Montenegro, Poland, and Ukraine. At the end of World War I and the breakup of the Habsburg Empire, the first Austrian republic was established.

Although Austria did not pay reparations after World War I, the country suffered hyperinflation during 1921–22 similar to that of Germany. In 1938, Austria was annexed by Germany and ceased to exist as an independent country until after World War II. In 1955, Austria became an independent sovereign state again, and was admitted as a member of the European Union in 1995, and a member of the Eurozone in 1999. Today, Austria is prosperous, enjoying high GDP per capita.

Bonds were traded on the Wiener Börse from 1771 and stocks from 1818 onward. Trading was interrupted by the world wars and, after the stock exchange reopened in 1948, stock trading was sluggish, and there was not a single IPO in the 1960s or 1970s. From the mid-1980s, building on Austria’s gateway to Eastern Europe, the Exchange’s activity expanded. Still, over the last 115 years, real stock market returns (0.6% per year) have been lower for Austria than for any other country with a record from 1900 to date.

Financials represents half (47%) of the Austrian equity market. At the start of 2015, the largest Austrian company is Erste Group Bank (25% of the market), followed by OMV, Voestalpine, Andritz, and Immofinanz.





Belgium lies at the center of Europe’s economic backbone and its key transport and trade corridors, and is the headquarters of the European Union. Belgium has been ranked the most globalized of the 208 nations that are scored in the KOF Index.

Belgium’s strategic location has been a mixed blessing, making it a major battleground in international wars, including the Battle of Waterloo, 200 years ago, and the two world wars of the 20th century. The ravages of war and attendant high inflation rates are an important contributory factor to its poor long-run investment returns – Belgium has been one of the three worst-performing equity markets and the seventh worst-performing bond market out of all those with a complete history. Its equity risk premium over 115 years was the worst of the mentioned countries when measured relative to bills, and fourth-lowest when measured relative to bonds.

The Brussels Stock Exchange was established in 1801 under French Napoleonic rule. Brussels rapidly grew into a major financial center, specializing during the early 20th century in tramways and other urban transport. Its importance has gradually declined, and what became Euronext Brussels suffered badly during the banking crisis. Three large banks made up a majority of its market capitalization at the start of 2008, but the banking sector now represents less than 10% of its index. By the start of 2015, most of the index (57%) was invested in just one company, Anheuser-Busch InBev, the leading global brewer and one of the world’s top five consumer products companies.




 canada-flagCanada is the world’s second-largest country by land mass (after Russia), and its economy is the tenth-largest. It is blessed with natural resources, having the world’s second-largest oil reserves, while its mines are leading producers of nickel, gold, diamonds, uranium and lead. It is also a major exporter of soft commodities, especially grains and wheat, as well as lumber, pulp and paper.

The Canadian equity market dates back to the opening of the Toronto Stock Exchange in 1861 and it is now the world’s fourth-largest stock market by capitalization. Canada’s bond market also ranks among the world’s top ten. Given Canada’s natural endowment, it is no surprise that oil and gas has a 21% weighting, with a further 4% in mining stocks. Banks comprise 29% of the Canadian market. The largest stocks are currently Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, and Suncor Energy.

Canadian equities have performed well over the long run, with a real return of 5.8% per year. The real return on bonds has been 2.2% per year. These figures are close to those for the United States.





The world’s most populous country, China has over 1.3 billion inhabitants. After the Qing Dynasty, it became the Republic of China (ROC) in 1911. The ROC nationalists lost control of the mainland at the end of the 1946–49 civil war, after which their jurisdiction was limited to Taiwan and a few islands.

Following the communist victory in 1949, privately owned assets were expropriated and government debt was repudiated, and the People’s Republic of China (PRC) has been a single-party state since then. It is therefore made a distinction among three periods. First, the Qing period and the ROC. Second, the PRC until economic reforms were introduced. Third, the modern period following the second stage of China’s economic reforms of the late 1980s and early 1990s. China’s economic growth since the reforms has been rapid, and it is now seen as an engine for the global economy.

China’s fast GDP growth has not been accompanied by superior investment returns. Nearly half (42%) of the Chinese stock market’s free-float capitalization is represented by financials, mainly banks and insurers. The largest companies are Tencent Holdings (8% of the index) and China Mobile and China Construction Bank (each 7%), followed by the Industrial and Commercial Bank of China (6%).



denmark-flag The Copenhagen Stock Exchange was formally established in 1808, but traces its roots back to the late 17th century. The Danish equity market is relatively small. It has a high weighting in healthcare (54%) and industrials (16%). Nearly one half (41%) of the Danish equity market is represented by one company, Novo-Nordisk. Other large companies include Danske Bank and AP Møller-Mærsk.





A member of the European Union since 1995, Finland is the only Nordic state in the Eurozone. The country has shifted from a farm and forestry community to a more industrial economy. Per capita income is among the highest in Western Europe.

Finland excels in high-tech exports and is the home country of Nokia. Following Microsoft’s acquisition of Nokia’s mobile phone business in November 2014, Nokia announced plans to license product designs to third-party manufacturers. Forestry provides a secondary occupation for Finland’s rural population.

Finnish securities were initially traded over-the-counter or overseas, and trading began at the Helsinki Stock Exchange in 1912. Since 2003, the Helsinki exchange has been part of the OMX family of Nordic markets. At its peak, Nokia represented 72% of the value-weighted HEX All Shares Index, and Finland was a particularly concentrated stock market. Today, the largest Finnish companies are currently Nokia (26% of the market), Sampo (19% of the market), and Kone (15%).




Paris and London competed vigorously as financial centers in the 19th century. After the Franco-Prussian War in 1870, London achieved domination. But Paris remained important, especially in loans to Russia and the Mediterranean region, including the Ottoman Empire.

Paris has continued to be an important financial center, while France has remained at the center of Europe, being a founder member of the European Union and the euro. France is Europe’s second-largest economy. It has the largest equity market in Continental Europe and one of the largest bond markets in the world. At the start of 2015, France’s largest listed companies were Sanofi, Total, and BNP Paribas.

Long-run French asset returns have been disappointing. France ranks in the bottom quartile of countries with a complete history for equity performance, for bonds and for bills, but in the top quartile for inflation – hence the poor fixed income returns. However, the inflationary episodes and poor performance date back to the first half of the 20th century and are linked to the world wars. Since 1950, French equities have achieved midranking returns.





German capital market history changed radically after World War II. In the first half of the 20th century, German equities lost two thirds of their value in World War I. In the hyperinflation of 1922–23, inflation hit 209 billion percent, and holders of fixed income securities were wiped out. In World War II and its immediate aftermath, equities fell by 88% in real terms, while bonds fell by 91%.

There was then a remarkable transformation. In the early stages of its “economic miracle,” German equities rose by 4,373% in real terms from 1949 to 1959. Germany rapidly became known as the “locomotive of Europe.” Meanwhile, it built a reputation for fiscal and monetary prudence. From 1949 to date, it has enjoyed the world’s second-lowest inflation rate, its strongest currency (now the euro), and an especially strong bond market.

Today, Germany is Europe’s largest economy. Formerly the world’s top exporter, it has now been overtaken by China. Its stock market, which dates back to 1685, ranks seventh in the world by size, while its bond market is among the world’s largest.

The German stock market retains its bias toward manufacturing, with weightings of 23% in basic materials, 22% in consumer goods, and 15% in industrials. The largest stocks are Bayer, Siemens, BASF, Allianz, and SAP.





Stock exchanges had existed from 1793 in Dublin and Cork, but Ireland was born as an independent country in 1922 as the Irish Free State, released from 700 years of Norman and later British control. In the period following independence, economic growth and stock market performance were weak and, during the 1950s, the country experienced large-scale emigration.

Ireland joined the European Union in 1973 and, from 1987, the economy improved. By the 1990s and early 2000s, Ireland experienced great economic success and became known as the Celtic Tiger. By 2007, Ireland had become the world’s fifth-richest country in terms of GDP per capita, the second-richest in the EU, and was experiencing net immigration. Over the period 1987–2006, Ireland had experienced the second-highest real equity return of any country. The financial crisis changed that, and the country still faces hardship.

The country is one of the smallest markets and, sadly, it has become smaller. Too much of the boom was based on real estate, financials and leverage, and Irish stocks were decimated after 2006.

To monitor Irish stocks from 1900, it was constructed an index for Ireland based on stocks traded on the country’s two stock exchanges. Ireland adopted the euro from the outset of the Eurozone, and our return series then became euro-denominated.




While banking can trace its roots back to Biblical times, Italy can claim a key role in the early development of modern banking. North Italian bankers, including the Medici family, dominated lending and trade financing throughout Europe in the Middle Ages. These bankers were known as Lombards, a name that was then synonymous with Italians.

Italy retains a large banking sector to this day, with banks still accounting for over a quarter (28%) of the Italian equity market, and insurance for a further 10%. Oil and gas accounts for 15%, and the largest stocks traded on the Milan Stock Exchange are Eni, Enel, Intesa Sanpaolo, Unicredit, and Generali.

Italy has experienced some of the poorest asset returns of any country. Since 1900, the annualized real return from equities has been 1.9%, which is one of the three lowest returns out of the countries here presented. After Germany and Austria, which experienced especially severe hyperinflations, Italy has suffered the poorest real bond and real bill returns of any country, the highest inflation rate, and the weakest currency.




Japan has a long heritage in financial markets. Trading in rice futures had been initiated around 1730 in Osaka, which created its stock exchange in 1878. Osaka was to become the leading derivatives exchange in Japan (and the world’s largest futures market in 1990 and 1991), while the Tokyo Stock Exchange, also founded in 1878, was to become the leading market for spot trading.

From 1900 to 1939, Japan was the world’s second best equity performer. But World War II was disastrous and Japanese stocks lost 96% of their real value. From 1949 to 1959, Japan’s “economic miracle” began and equities gave a real return of 1,565%. With one or two setbacks, equities kept rising for another 30 years.

By the start of the 1990s, the Japanese equity market was the largest in the world, with a 41% weighting in the world index, as compared to 30% for the USA. Real estate values were also riding high: a 1993 article in the Journal of Economic Perspectives reported that, in late 1991, the land under the Emperor’s Palace in Tokyo was worth about the same as all the land in California.

Then the bubble burst. From 1990 to the start of 2009, Japan was the worst-performing stock market. At the start of 2015, its capital value is still close to one third of its value at the beginning of the 1990s. Its weighting in the world index fell from 41% to 8%. Meanwhile, Japan suffered a prolonged period of stagnation, banking crises and deflation. Hopefully, this will not form the blueprint for other countries facing a financial crisis.

Despite the fallout after the asset bubble burst, Japan remains a major economic power. It has the world’s second-largest equity market as well as its second biggest bond market. It is a world leader in technology, automobiles, electronics, machinery and robotics, and this is reflected in the composition of its equity market.





Although some forms of stock trading occurred in Roman times and 14th century Toulouse mill companies’ securities were traded, transferable securities appeared in the 17th century. The Amsterdam market, which started in 1611, was the world’s main center of stock trading in the 17th and 18th centuries.

A book written in 1688 by a Spaniard living in Amsterdam (appropriately entitled Confusion de Confusiones) describes the amazingly diverse tactics used by investors. Even though only one stock was traded – the Dutch East India Company – they had bulls, bears, panics, bubbles and other features of modern exchanges.

The Amsterdam Exchange continues to prosper today as part of Euronext. Over the years, Dutch equities have generated a mid-ranking real return of 5.0% per year. The Netherlands has traditionally been a low inflation country and, since 1900, has enjoyed the lowest inflation rate among the EU countries and the second lowest (after Switzerland) from among all the countries here covered.

The Netherlands has a prosperous open economy. Although Royal Dutch Shell now has its primary listing in London, and a secondary listing in Amsterdam, the Amsterdam exchange still hosts more than its share of major multinationals, including Unilever, Koninklijke Philips, ING Group, Akzo Nobel, Heineken, and ASML Holding. 



New Zealand 


The British colony of New Zealand became an independent dominion in 1907. Traditionally, New Zealand’s economy was built upon a few primary products, notably wool, meat and dairy products. It was dependent on concessionary access to British markets until UK accession to the European Union.

Over the last two decades, New Zealand has evolved into a more industrialized, free market economy. It competes globally as an export-led nation through efficient ports, airline services, and submarine fiberoptic communications.

The New Zealand Exchange traces its roots to the Gold Rush of the 1870s. In 1974, the regional stock markets merged to form the New Zealand Stock Exchange. In 2003, the Exchange demutualized and officially became the New Zealand Exchange Limited. The largest firms traded on the exchange are Fletcher Building (17% of the index), Spark New Zealand (17%), and Auckland International Airport (11%).




Norway is a small country, ranked 115th by population and 61st by land area. However, it is blessed with large natural resources. It is the only country that is self-sufficient in electricity production (through hydro power) and it is one of the world’s largest exporters of oil. Norway is the second-largest exporter of fish.

The population of 4.9 million enjoys the largest GDP per capita in the world, apart from a few city states. Norwegians live under a constitutional monarchy outside the eurozone. Prices are high: The Economist’s Big Mac Index recently reported that a burger in Norway was more expensive than in any other country. The United Nations, through its Human Development Index, ranks Norway the best country in the world for life expectancy, education and overall standard of living.

The Oslo Stock Exchange was founded as Christiania Bors in 1819 for auctioning ships, commodities, and currencies. Later, this extended to trading in stocks. The exchange now forms part of the OMX grouping of Scandinavian exchanges.

In the 1990s, the Government established its petroleum fund to invest the surplus wealth from oil revenues. This has grown to become the largest fund in the world, with a market value approaching USD 0.9 trillion. The fund invests predominantly in equities and, on average, it owns 1.3% of every listed company in the world. The largest Oslo Stock Exchange stocks are Statoil (19% of the index), DNB (18%), and Telenor (16%).




In the 15th century, during The Age of the Discoveries, a rudimentary form of centralized market existed in Lisbon. It solved two problems: how to assemble the large amounts of money necessary to finance the fleets and the voyages, and how to agree the premium for insurance contracts to cover the associated risks. In general, this was not a formally organized market, and transactions were conducted in the open air at a corner of a main street in downtown Lisbon. Nevertheless, that market offered opportunities to trade commodities, in particular those brought by this nation of mariners from recently discovered countries.

Modern Portugal emerged in 1974 after a bloodless military coup which overthrew the former regime. The country joined the European Union in 1986 and was among the first to adopt the euro. In the second decade of the 21st century the Portuguese economy suffered its most severe recession since the 1970s, and unemployment still remains high.

The companies with the largest market capitalizations are in the utility and energy groups – comprising 53% in utilities and 18% in oil and gas. The largest companies traded in Lisbon are EDP, Galp Energia, Millennium BCP and Jeronimo Martins.





Russia is the world’s largest country, covering more than one-eighth of the Earth’s inhabited land area, spanning nine time zones, and located in both Europe and Asia. It is the world’s leading oil producer, second largest natural gas producer, and third-largest steel and aluminium exporter. It has the biggest natural gas and forestry reserves and the second-biggest coal reserves.

After the 1917 revolution, Russia ceased to be a market economy. We therefore distinguish among three periods. First, the Russian Empire up to 1917. Second, the long interlude following Soviet expropriation of private assets and the repudiation of Russia’s government debt. Third, the Russian Federation, following the dissolution of the Soviet Union in 1991. Very limited compensation was eventually paid to British and French bondholders in the 1980s and 1990s, but investors in aggregate still lost more than 99% in present value terms. The 1917 revolution is deemed to have resulted in complete losses for domestic stock and bondholders. Russian returns are incorporated into the world, world ex-US, and Europe indices.

In 1998, Russia experienced a severe financial crisis, with government debt default, currency devaluation, hyperinflation, and an economic meltdown. However, there was a surprisingly swift recovery and, in the decade after the 1998 crisis, the economy averaged 7% annual growth. In 2008–09, there was a major reaction to global setbacks and commodity price swings. Fuelled by a persistently volatile political situation, Russian stock market performance has likewise been volatile.

By the beginning of 2015, over half (56%) of the Russian stock market comprised oil and gas companies, the largest being Gazprom and Lukoil. Adding in basic materials, resources are over two-thirds of market capitalization.



South Africa 


The discovery of diamonds at Kimberley in 1870 and the Witwatersrand gold rush of 1886 had a profound impact on South Africa’s subsequent history. Today, South Africa has 90% of the world’s platinum, 80% of its manganese, 75% of its chrome and 41% of its gold, as well as vital deposits of diamonds, vanadium, and coal.

The 1886 gold rush led to many mining and financing companies opening up. To cater to their needs, the Johannesburg Stock Exchange (JSE) opened in 1887. Over the years since 1900, the South African equity market has been one of the world’s most successful, generating a real equity return of 7.4% per year, which is the highest return among the presented countries.

Today, South Africa is the largest economy in Africa, with a sophisticated financial structure. Back in 1900, South Africa, together with several other countries, would have been deemed an emerging market. According to index compilers, it has not yet emerged and today ranks as the fifth-largest emerging market.

Gold, once the keystone of South Africa’s economy, has declined in importance as the economy has diversified. Financials account for 24%, while basic minerals lag behind with only 8% of the market capitalization. Taken together, media and mobile telecommunications account for 26% of the market index. The largest JSE stocks are Naspers, MTN, and Sasol.




While the 1960s and 1980s saw Spanish real equity returns enjoying a bull market and ranked second in the world, the 1930s and 1970s witnessed the very worst returns among the countries. Over the entire 115 years covered by this analysis, Spain’s long-term equity premium (measured relative to bonds) was 1.9%, which is lower than for any other country that it is covered over the same period.

Though Spain stayed on the sidelines during the two world wars, Spanish stocks lost much of their real value over the period of the civil war during 1936–39, while the return to democracy in the 1970s coincided with the quadrupling of oil prices, heightened by Spain’s dependence on imports for 70% of its energy needs.

The Madrid Stock Exchange was founded in 1831 and is now the fourteenth-largest in the world, helped by strong economic growth since the 1980s. The major Spanish companies retain strong presences in Latin America combined with increasing strength in banking and infrastructure across Europe. The largest stocks are Banco Santander (24% of the index), Telefonica, BBVA, and Inditex.




Were a Nobel prize to be awarded for investment returns, it would be given to Sweden for its achievement as the only country to have real returns for equities, bonds and bills all ranked in the top six.

Real Swedish equity returns have been supported by a policy of neutrality through two world wars, and the benefits of resource wealth and the development of industrial holding companies in the 1980s. Overall, they have returned 5.8% per year.

The Stockholm Stock Exchange was founded in 1863 and is the primary securities exchange of the Nordic countries. Since 1998, it has been part of the OMX grouping. In Sweden, the financial sector accounts for a third (35%) of equity market capitalization. The largest single company is Hennes and Mauritz, followed by Nordea Bank and Ericsson.





The Swiss stock market traces its origins to exchanges in Geneva (1850), Zurich (1873), and Basel (1876). It is now the world’s fifth-largest equity market, accounting for 3.1% of total world value.

Since 1900, Swiss equities have achieved an acceptable real return of 4.5%, while Switzerland has been one of the world’s four best-performing government bond markets, with an annualized real return of 2.3%. Switzerland has also enjoyed the world’s lowest inflation rate: just 2.2% per year since 1900. Meanwhile, the Swiss franc has been the world’s strongest currency.

Switzerland is one of the world’s most important banking centers, and private banking has been a major Swiss competence for over 300 years. Swiss neutrality, sound economic policy, low inflation and a strong currency have all bolstered the country’s reputation as a safe haven. Today, close to 30% of all cross-border private assets invested worldwide are managed in Switzerland.

Switzerland’s pharmaceutical sector accounts for a third (36%) of the equity market. Listed companies include world leaders such as pharma companies Novartis and Roche, plus Nestle – a trio that together comprise more than half of the equity market capitalization of Switzerland. 



United Kingdom

united-kingdom-flagOrganized stock trading in the United Kingdom dates from 1698, and the London Stock Exchange was formally established in 1801. By 1900, the UK equity market was the largest in the world, and London was the world’s leading financial center, specializing in global and cross-border finance.

Early in the 20th century, the US equity market overtook the UK and, nowadays, New York is a larger financial center than London. What continues to set London apart, and justifies its claim to be the world’s leading international financial center, is the global, cross-border nature of much of its business.

Today, London is ranked as the top financial center in the Global Financial Centres Index, Worldwide Centers of Commerce Index, and Forbes’ ranking of powerful cities. It is the world’s banking center, with 550 international banks and 170 global securities firms having offices in London. The UK’s foreign exchange market is the largest in the world, and Britain has the world’s third-largest stock market, third-largest insurance market, and seventh-largest bond market.

London is the world’s largest fund management center, managing almost half of Europe’s institutional equity capital, and three-quarters of Europe’s hedge fund assets. More than three-quarters of Eurobond deals are originated and executed there. More than a third of the world’s swap transactions and more than a quarter of global foreign exchange transactions take place in London, which is also a major center for commodities trading, shipping and many other services.

Royal Dutch Shell now has its primary listing in the UK. Other major companies include HSBC, BP, Vodafone, British American Tobacco, and GlaxoSmithKline.


United States 


In the 20th century, the United States rapidly became the world’s foremost political, military, and economic power. After the fall of communism, it became the world’s sole superpower. The International Energy Agency predicts that the USA will be the world’s largest oil producer by 2017.

The USA is also a financial superpower. It has the world’s largest economy, and the dollar is the world’s reserve currency. Its stock market accounts for 52% of total world value, which is more than six times as large as Japan, its closest rival. The USA also has the world’s largest bond market.

US financial markets are by far the best-documented in the world and, until recently, most of the long-run evidence cited on historical asset returns drew almost exclusively on the US experience. Since 1900, US equities and US bonds have given real returns of 6.5% and 2.0%, respectively. 





It is interesting to see how the countries have performed in aggregate over the long run. We have therefore created an all-country world equity index denominated in a common currency, in which each of the 23 countries is weighted by its starting-year equity market capitalization. We also compute a similar world bond index, weighted by GDP.

 These indices represent the long-run returns on a globally diversified portfolio from the perspective of an investor in a given country. The charts show the returns for a US global investor. The world indices are expressed in US dollars; real returns are measured relative to the US inflation.



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