Superstar Firms and Narrow Stock Market Returns

Superstar Stocks Are Getting Rarer in the Winner-Take-All Market
https://www.bloomberg.com/news/articles/2023-06-27/ai-frenzy-is-the-oldest-tale-in-markets-the-rich-getting-richer
“For people looking on anxiously as stock wealth converges in an oligarchy of high-tech juggernauts, some perspective: It’s nothing new.
That’s the upshot of six years of research by Hendrik Bessembinder, whose work shows how unevenly the stock market’s rewards are apportioned over time. The Arizona State University finance professor is back with a new study, Shareholder Wealth Enhancement, 1926 to 2022, saying that not only do bizarrely few stocks make up the lion’s share of returns in the last century, but that the pool of superstar companies may be shrinking”.

FT Piece: Narrow markets should humble macro forecasters

https://www.ft.com/content/c5d7ee71-92a2-4840-9344-2f62e9642e61

"Narrow stock market returns are, after all, the norm. Research by Arizona State University professor Hendrik Bessembinder shows that more than half of the $55.1tn in net wealth generated by the US equity market between 1926 and 2022 came from the performance of fewer than 0.3 per cent of the market’s stocks, with the other half of this net wealth coming from the next best 3.1 per cent of stocks.

Moreover, almost three-fifths of stocks actually destroyed wealth over the period. In quant-speak, the distribution of compound stock returns has been very positively skewed".

 

Hendrik Bessembinder, Te-Feng Chen, Goeun Choi & K. C. John Wei (2023) Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks, Financial Analysts Journal, 79:3, 33-63

https://doi.org/10.1080/0015198X.2023.2188870

Abstract

We study long-run shareholder outcomes for more than 64,000 global common stocks during the January 1990 to December 2020 period. The majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing 2.4% of firms account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the United States, 1.41% of firms account for the $US 30.7 trillion in net wealth creation.

 

Bessembinder, Hendrik (Hank), Shareholder Wealth Enhancement, 1926 to 2022

https://ssrn.com/abstract=4448099 or http://dx.doi.org/10.2139/ssrn.4448099