Do Stocks Outperform Treasury bills?

Hendrik Bessembinder

Research

53 Pages

Hendrik Bessembinder examines why broad equity markets outperform Treasury bills even though most individual stocks do not. The paper argues market wealth creation is driven by a tiny group of extreme winners, with just 4% of companies accounting for the market’s net gain since 1926.

Key Takeaways

Extreme Return Concentration: Just 1,092 companies, or 4.31% of firms in CRSP, generated 100% of net U.S. stock market wealth creation from 1926 through 2016.
Most Stocks Underperform: Only 42.6% of individual stocks beat one month Treasury bills over their lifetimes, while 57.4% failed to outperform cash equivalents.
Diversification Matters More: Single stock strategies underperformed the market in 96% of simulations, while portfolios with 100 stocks beat Treasury bills 93.1% of the time.
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