Do Stocks Outperform Treasury Bills? - Bessembinder's Report

Granted, total portfolio returns have more to do with actual company selection and portfolio construction, but it doesn’t hurt the process to select from a pool of companies with characteristics that increase our chances of a successful outcome. This is where the findings of Bessembinder’s work are relevant. Of our requirements listed above, his work positively reinforces our own common sense on investing in large financially sound companies traded on a recognized exchange. Here are some of his findings:

On market value:  81.3% of stocks in the largest decile have positive decade buy-and-hold returns, and 70.5% outperformed the one-month Treasury Bill. (The largest decile includes the top 10% of all stocks ranked by market value of equity.)  [Table 2A (pg 43) and discussed on pg 15]

On exchange listing:  Of those stocks that initially appear on the NYSE, 71.6% had a positive lifetime buy-and-hold return and 65.3% had a lifetime buy-and-hold that exceeded the one-month Treasury Bill return. [pg 17]

On debt:  The results on Table 1C indicate that unlevered firms on average deliver strong stock market returns. [Table 1C (pg 42) and discussed on pg 14]

A final note of caution.  I have not given anything close to the full information provided in Dr. Bessembinder’s work. I have pulled information to share with you that reinforces my own beliefs and is relevant to this discussion.

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Disclosure: Anderson Griggs & Company, Inc., doing business as Anderson Griggs Investments, is a registered investment adviser.  Anderson Griggs only conducts business in states and ...

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