Hendrik Bessembinder examines how a small subset of stocks drives the majority of long-term market wealth creation, challenging the idea that broad diversification alone captures outsized returns. The paper highlights that just 0.32% of firms generated half of shareholder wealth, raising questions about how predictable these extreme winners really are.
Extreme Stock Market Performers, Part I: Expect Some Drawdowns
Arizona State
Hendrik Bessembinder
Research
13 Pages
Key Takeaways
Extreme Wealth Concentration: Just 83 firms, or 0.32% of all stocks, generated 50% of total shareholder wealth from 1926–2019, while 5 firms alone contributed 11.9%.
Characteristics Not Predictive: Observable variables explain only 7.6% of return variation, leaving over 90% of outcomes driven by factors beyond measurable fundamentals.
Growth And Profitability Bias: Top performers show higher asset growth near 30%+ and stronger profitability, often paired with elevated R&D spending relative to peers.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
