Australian stocks may finally be starting to look like a good option compared to global shares, say AMP Capital, after a decade in which the local sharemarket has completely underperformed its US and overseas counterparts. 
"It's too early to say the underperformance by Australian shares is over, but some of the drivers may be waning," said AMP Capital chief economist Shane Oliver.
'Investors should maintain a decent exposure (to Australian shares) or at least avoid moving further away from (Australian shares)."
Two comparisons illustrate the stark underperformance of the local sharemarket, Dr Oliver said.
Firstly, since the   March 2009 low in sharemarkets at the height of the global financial crisis, US shares have increased 210 per cent and global shares by 145 per cent. In stark contrast, the Australian sharemarket has increased only 65 per cent.
Secondly, both global and US shares reached record highs in 2015 and, despite a recent slump, are still far above pre-GFC levels.
The Australian sharemarket has never come close to surpassing its   November 2007 highs of 6828 (S&P/ASX200), and as of Tuesday is over 22 per cent below this peak.
"The underperformance of Australian versus global shares since 2009 reflects a combination of tighter monetary policy, the strong Australian dollar into 2011, the slump in commodity prices, property crash phobia and classic mean reversion," Dr Oliver said.
"High dividend payments are not to blame. In fact, Australia's performance is not quite as bad once dividends are allowed for."
It was too early to say the underperformance of the Australian shares v global shares had come to an end, said Dr Oliver. But there were a number of factors beginning to favour Australian shares over global shares:
The US is gradually raising interest rates at a time when the Reserve Bank is expected to cut. Although the Australian dollar should ideally be lower, it's still 30 per cent down from its 2011 high, making Australian industry more competitive.
While it's too early to say commodity prices have bottomed, their huge declines since 2011 suggest the worst may be over. Furthermore, fears of a Chinese hard landing appear to be unjustified.
Due to mean reversion, Australian shares are due for a decade of outperformance. The Australian economy appears to be finally adjusting to the collapse in mining investment. Australia's growth rate is higher than in the US, Europe and Japan due to higher population growth.
Finally, if dividends are included in the overall calculations, the picture looks far better for Australian share investors, said Dr Oliver.
"After allowing for reinvested dividends - i.e., looking at the ASX200 Accumulation Index - the Australian sharemarket has at least surpassed its 2007 high," he said.
"Australian shares still pay a higher dividend yield than traditional global shares: 4.8 per cent versus 2.7 per cent. This is important, because dividend payments are a big chunk of the return an investor will get.
"Finally, franking credits add around 1.5 per cent to the post-tax return from Australian shares for Australia-based investors."