Buy and Hold to get a Treasury Bill Return… if at all

If value creation is a corporation’s raison d’être, the vast majority of corporations do not live up to the expectation. Most individual US common stocks provide buy-and-hold returns that fall short of those earned on one-month US Treasury bills over the same horizons. This is the conclusion of a recent paper(1) by Hendrik Bessembinder. The positive mean excess returns observed for broad equity portfolios are attributable to only a few stocks.

While the overall US stock market has handily outperformed Treasury bills in the long run, most individual common stocks have not. Of the nearly 26,000 common stocks that have appeared on CRSP from 1926 to 2016, less than half generated a positive lifetime buy-and-hold return (inclusive of reinvested dividends) and only 42.6% have a lifetime buy-and-hold return greater than the one-month Treasury bill over the same time interval.

When stated in terms of lifetime dollar wealth creation to shareholders in aggregate, approximately one-third of 1% of the firms that issued common stocks contained in the CRSP database account for half of the net stock market gains, and slightly more than 4% of the firms account for all of the net stock market gains. The other 96% of firms that issued stock collectively matched one-month Treasury bill returns over their lifetimes.

I prefer not to know the details about the Spanish Stock Market.


(1) Bessembinder, Hendrik, Do Stocks Outperform Treasury Bills? (May 28, 2018). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: or

Featured Image: Warren Buffet – Caricature

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