Hendrik Bessembinder: Why It's So Hard to Beat the Market | Rational Reminder 346

Описание: Meet with PWL Capital: https://pages.pwlcapital.com/en-ca/co...

Did you know that just a handful of stocks drive nearly all of the stock market’s long-term gains? In this episode, we sit down with Hendrik Bessembinder to discuss his groundbreaking research on why most stocks fail to outperform Treasury bills and how a small fraction of stocks generate the most long-term market returns. Hendrik is a Professor in the Department of Finance at Arizona State University whose research focuses on market design, trading, and long-term investment performance across stock, foreign exchange, fixed income, futures, and energy markets. In addition to his academic contributions, Professor Bessembinder has over 25 years of consulting experience, advising major firms, financial markets, and government agencies. In our conversation, we delve into the findings of his research and find out how a small fraction of stocks generate the majority of long-term returns. We explore why traditional investment strategies often overlook the impact of skewness, the impacts of broad diversification and passive investing, and why active fund managers struggle to beat the market. Discover why chasing past returns can lead to costly mistakes, his latest research on 'sustainable returns', what type of industries have the highest stock returns, common investing mistakes, and more. Join us to uncover the surprising realities of stock market returns and how you can build a portfolio that stands the test of time with Professor Hendrik Bessembinder.

Timestamps:

0:00:00 Intro
0:04:29 What it means to say individual stock returns are positively skewed
0:08:29 How common it is for stocks to deliver negative returns, or even total losses
0:15:33 The implications of skewness for standard measures of investment management performance, like the Sharpe ratio
0:19:04 How the bootstrap simulations in Hendrik's paper work
0:23:14 The effect adding more stocks to the bootstrapped strategies have
0:27:42 How important diversification for long-term investors is
0:35:59 Explaining the stronger skewness in global stock returns compared to U.S. stocks
0:39:54 Practical implications for investors
0:44:22 The stocks in the U.S. market have delivered the highest returns to investors
0:47:35 The relationship between the type of company, or industry, and earning high returns
0:54:26 The proportion of U.S. equity mutual funds in your sample outperform SPY, an S&P 500 ETF, at the decade horizon
0:57:05 How the average mutual fund performs
1:10:14 Other areas of his research Hendrik thinks investors should know about
1:17:40 Hendrik defines success in his life

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/t....
Rational Reminder Website — https://rationalreminder.ca/
Rational Reminder on Instagram —   / rationalreminder  
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder
Rational Reminder on YouTube —    / channel  
Rational Reminder Email — [email protected]
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn —   / benjaminwfelix  
Mark McGrath on LinkedIn —   / markmcgrathcfp  
Mark McGrath on X — https://x.com/MarkMcGrathCFP
Professor Hendrik Bessembinder — https://search.asu.edu/profile/2717225
Arizona State University — https://www.asu.edu/
KRIS — https://www.kris-online.com/
Professor Hendrik Bessembinder papers on SSRN — https://papers.ssrn.com/sol3/cf_dev/A...
SPIVA — https://www.spglobal.com/spdji/en/res...
Episode 322: Professor Marco Sammon — https://rationalreminder.ca/podcast/322
Episode 124: Professor Lubos Pastor — https://rationalreminder.ca/podcast/124

Papers From Today’s Episode:

'Do Stocks Outperform Treasury Bills?' — https://www.sciencedirect.com/science...
'Extending Portfolio Theory to Compound Returns' — https://papers.ssrn.com/sol3/papers.c...
'Luck versus Skill in the Cross-Section of Mutual Fund Returns' — https://onlinelibrary.wiley.com/doi/a...
'Measuring Skill in the Mutual Fund Industry' — https://www.sciencedirect.com/science...
'Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks' — https://www.tandfonline.com/doi/abs/1...
'Which U.S. Stocks Generated the Highest Long-Term Returns?' — https://papers.ssrn.com/sol3/papers.c...
'How Should Investors’ Long-Term Returns Be Measured?' — https://www.tandfonline.com/doi/abs/1...