TaniaVdB via Pixabay
Each morning, we peruse a variety of research sites to see if there is anything exciting, new, and intriguing. Rarely does one find something that triggers a knee-jerk reaction like a recent paper by Hendrik Bessembinder.
The title almost FORCES you to read further:
Do Stocks Outperform Treasury Bills?
And the abstract reads like a horror film if you are an equity investor:
The good professor highlights that the distribution of stock returns is driven by a small percentage of really big winners.
Of course, this finding is not new. See:
- Our study on the distribution of stock returns
- The Longboard study on the distribution, “The Capitalism Distribution” (1)
However, Dr. Bessembinder pulls out all the stops and conducts a lot of incredibly interesting research into the details like only an academic writer can do (their job is primarily dedicated to research!).
A few facts/findings over the 1926 to 2015 time horizon:
- Only 47.7% of all monthly stock returns from the CRSP database (NYSE/AMEX/NASDAQ) are larger than the one-month Treasury rate.
- 42.1% of common stock holding period returns beat the holding return on T-bills.
- The 86 top-performing stocks — less 33bps of the entire universe — account for over half of the total wealth created.
- …and on and on…
My favorite table is the last one, which maps out the top lifetime wealth creators in the US stock market:
The top 5– Exxon (XOM), Apple (AAPL), GE (GE), Microsoft (MSFT), and IBM (IBM) — account for over 10% of lifetime wealth on the entire stock market. The top 15 names account for 16.26% of total wealth EVER created in the US stock market.
Incredible. Dig in.
Note: This site provides no information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.
Join thousands of other readers and subscribe to our blog.
Please remember that past performance is not an indicator of future results. Please read our full disclaimer. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. This material has been provided to you solely for information and educational purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and Alpha Architect to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Alpha Architect.
Ben Carlson has a discussion on the results here
Uh Oh… Do Treasury Bills Actually Outperform Most Stocks? was was originally published at Alpha Architect. Please read the Alpha Architect Disclosures at your convenience.
