We Study Billionaires - The Investor’s Podcast Network TIP667: Why Most Stocks Will Lose You Money w/ Professor Hendrik Bessembinder
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Oct 11, 2024 
Professor Hendrik Bessembinder, a finance expert from Arizona State University, dives into why most stocks fail to deliver returns over the long haul. He highlights that only a select few stocks drive market gains while the majority lose money. Bessembinder discusses the asymmetry in stock market returns and why equities outshine treasury bills over time. He shares insights on the characteristics of the biggest market winners and the challenges stock pickers face today, revealing intriguing trends in both U.S. and international stocks.
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Accidental Discovery
- Professor Hendrik Bessembinder's research on stock performance relative to treasury bills stemmed from an accidental observation.
- He noticed a negative average return in a large stock sample, leading him to investigate long-term stock performance.
Risk-Return Paradox
- Although stocks are considered risky, most individual stocks do not outperform treasury bills.
- This challenges the traditional risk-return trade-off theory.
Skewness in Returns
- Positive skewness in stock returns is similar to venture capital, where a few big winners drive overall returns.
- This asymmetry is pervasive in investing, not limited to specific asset classes.
