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Do stocks outperform Treasury Bills?


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I think if you look deeper into this paper you will find that 30% of stocks have lifetime returns that beat the market. Yes,  that is skewed from a naive expectation of 50%. But the claim that 4% of stocks account for all returns is deceptive because it lumps all the losers with the stocks ranked below the top 4%. The top 5% through 30% beat the market when you don't lump the losers into that group. So things are not so bad.

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Definitely a good read.

Over time, a lot of excess return to capture. But a zero sum game overall.

We know that most excess return occurs relatively infrequently and this article suggests that only a minority of stocks provide the excess return.

The article uses some "bootstrap" technique which can introduce even more skewness.

Important to remember that the benchmark they use is not the markets but T-bills...yield now at about 1,05%.



Many firms disappear.

You don't hear much, usually, about investment management firms that disappear (survival bias).

To win the race, you have to finish the race.

The horses (unicorns?) you bet on will make the difference.

To succeed, avoiding losers may be just as important as picking winners.

The game we play fits into a spectrum varying from at large diversification to highly concentrated investing and "tactical" allocation.

Fascinating game.


One more thing.

-If you accept the assumptions and limitations of the study,

-If you are a regular joe who plans to meet a financial planner at this point,

-If you accept that most mutual funds/equivalents underperform the market despite "adequate" diversification,


It means that now, your expected return (less than T-bills) is less than fund management fees.

Does that mean that the financial planner would suggest to stuff it under the mattress?

I doubt it.

Interesting times.


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It means that now, your expected return (less than T-bills) is less than fund management fees.

No, that's not what the paper implies. It just says something about the distribution of returns of individual stocks. It doesn't say what the expected return is of a portfolio of stocks. That one can be very positive.

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