
Do Stocks Outperform Treasury Bills? (2018) - ZeljkoS
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447
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nabla9
This is the second reason why indexing outperforms actively managed funds over
the long term (The first reason is the fees).

Price weighed index fund rebalances regularly and never misses out those best-
performing four percent. Actively managed fund manager might do a good job
valuing companies and might catch some success stories, but it's unlikely that
they catch them all consistently.

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digianarchist
Isn't there only a handful of hedge funds that have posted profits every year
of operation?

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Scoundreller
In my dreams, I create 1024 stock-recommending twitter bots.

If half beat the market in a year and half don’t, i’ll Still have one that
goes up every year after 10 years, and sell it for a fortune.

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Majromax
> If half beat the market in a year and half don’t

As per this article, that wouldn't happen: more than half of the bots would
fail to beat the market.

This article finds that the vast majority of the positive return is explained
by relatively few stocks, leading to a positive skewness. The median random
choice has a below-mean outcome.

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Scoundreller
Right. Regression toward the mean is inevitable.

But I think people appreciate a story about picking the right stock more than
the right stocks, which helps that problem.

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benj111
This isnt really surprising to me. What's the average lifetime of a company,
even one that has reached maturity? I would guess much less than 100 years.

I suppose the waters are muddied somewhat by consolidation, in 1927 there were
10s(?) of thousands of car companies, today we're basically down to 20(?). No
doubt many went bust, but many also got subsumed.

The fact that 3/7 companies have outperformed Treasuries since 1927 is the
surprising thing for me, not that 4/7 havent.

~~~
countryqt30
Make it even more extreme. I bet that the Treasuries would also outperform if
you take 10'000 year timespan. Simply because: Which company would really
survive 10'000 years, huh? So the total return would be 0. And as long as
Treasuries>0, that research paper is little more than a fairly obvious
statement, at best.

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lonelappde
What government survives 10K years?

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ZeljkoS
Followup paper "Do Global Stocks Outperform US Treasury Bills?":
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3415739](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3415739)

~~~
countryqt30
Note how this is about GLOBAL stocks, not US Stocks, which would be the better
comparison

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lixtra
A little bit OT: did anybody come up with a way to graph two stocks such that
you see individual long term performance but also relative performance?

I.e. you can plot them on different scales, so that they both start at the
same position. Then you easily see which stock outperformed. But what if you
want to see when it was a good time to switch as well?

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kgwgk
Use a log scale, it makes easier to compare the performance in different
periods and the spread between the two lines gives you the relative
performance (when both stocks have the same performance the lines move in
parallel, when the spread widens the upper line is performing better and vice
versa).

~~~
lonelappde
This ask avoids the problem of having the entire comparison determined by the
arbitrary or deceptive choice of start date for baseline price.

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RichardHeart
Please note that this is GLOBAL stocks.

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kryptiskt
I'm not going to buy any bonds in the current environment: Swedish 3-month
bills yield -0.5%, 10-year bonds yield -0.2%. Whatever the historical data
says, I can't see anyone buying at those prices unless they have to.

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BukhariH
Well, if you’re a US based investor then it might not be a bad idea to pick up
some of those -0.5% yield bonds when you consider the effect of currency
hedging.

Conversely, for EUR based fund managers you’ll likely be better of sticking to
negative yielding EUR denominated bonds vs treasuries.

Source:

[https://www.forbes.com/sites/vineerbhansali/2019/06/17/tradi...](https://www.forbes.com/sites/vineerbhansali/2019/06/17/trading-
sardines-the-case-of-currency-hedged-negative-yielding-bonds/)

[https://www.ft.com/content/85c56472-bdcb-11e9-b350-db00d5096...](https://www.ft.com/content/85c56472-bdcb-11e9-b350-db00d509634e)

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countryqt30
Why not compare Philippine Treasuries and US Stocks next? #1 rule in finance:
use the correct benchmarks ;D

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acjohnson55
Does this have any implication for indexing criteria?

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gigatexal
And who is the author? A graduate student?

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H8crilA
Do we really need a paper for something that takes 5 seconds to backtest?

[https://www.portfoliovisualizer.com/backtest-asset-class-
all...](https://www.portfoliovisualizer.com/backtest-asset-class-
allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2019&lastMonth=12&calendarAligned=true&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&benchmark=VFINX&asset1=LongTreasury&allocation1_1=100&asset2=IntermediateTreasury&allocation2_2=100&asset3=ShortTreasury&allocation3_3=100&total1=100&total2=100&total3=100)

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RichardHeart
GLOBAL stocks. You linked to the Vanguard 500 index which is US only
companies.

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wcoenen
I tried to use ishares MSCI ACWI as the benchmark, but apparently that only
goes back to 2009.

(Not that the paper is trying to do something like that. It is more about the
performance problems of individual stocks. It is not claiming that treasuries
outperform a stock market index.)

