Automatic Bid: Flows from Active to Passive

Research from Arizona State professor Hendrik Bessembinder looked at how equities performed versus treasuries from 1926 to 2016. Bessembinder found that only ~4% of companies made up virtually all value created (and returns generated) over the 90-year period. In each group of 25 stocks, roughly 24 (96%) did not outperform treasuries.

This work effectively invalidates the idea that stocks broadly outperform government bonds. Only a very select number of stocks outperform. The study also gives ammunition to evangelists on both sides of the passive-active debate. One could say it makes little sense to index into a large, broadly diversified set of equities when only a small portion will do well over time. Another might rightly retort that one must be able to select ex-ante which those four percent of outperforming equities.

Recent Posts

See All

Preview: 2020 Year-End Letter

A snippet from our 2020 Year-End Letter. Download the full letter here. Dear friends and valued investors, The historian Eugen Weber wrote a book called The Hollow Years about France in the 1930s. I’m

Lions, partisans & discretionary income

Aside from life-threatening situations, one does not need a study to show that humans often struggle to incorporate new or conflicting information into their existing views. If you are standing near y

©2018-2020 Canterbury Tollgate. Canterbury Tollgate ("CTG") is a dba for Weise Risk Advisors LLC, a registered investment adviser. Information found on this website may not be used without expressed written consent from an authorized officer of The Company. Content on this website is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell a security.

783 Old Hickory Blvd. Ste 240

Brentwood, TN 37027

Phone: 615-800-6117