The Meb Faber Show
Welcome to The Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Hendrik Bessembinder - Do Stocks Outperform T-Bills? | #532
Today’s guest is Hendrik Bessembinder, a professor at Arizona State University. In today’s episode, Meb and Hank discuss Hank's research on long-term stock returns and wealth generation. They explore the concept of power laws in the stock market, where a small percentage of stocks generate significant returns, while the majority underperform. They also discuss the implications of Hank's findings for investors, including the importance of diversification and the challenges of holding onto big winners.
Key Points
- Most individual stocks do not outperform Treasury bills, and the equity premium of the market is largely driven by a small percentage of high-performing stocks.
- The concept of shareholder wealth creation is important to consider, as it measures wealth in dollars and accounts for factors like dividends not being reinvested, seasoned equity offerings, and share repurchases.
- When investing in mutual funds, the majority have historically underperformed market benchmarks like the S&P 500, leading to a significant transfer of wealth from investors to mutual fund managers.
Chapters
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Transcript
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