Yield asymmetry problem

Discussion in 'Economics' started by Liberty Market Investment, Feb 22, 2021.

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    Hendrick Bessembinder, professor of finance at the University of Arizona, has done research and found out wich public companies have brought the most profits to shareholders since 1926.

    It turned out that out of tens of thousands of shares, only the best 50 are responsible for 40% of the total increase in market capitalization.The return on 96% of the stock did not match even the risk-free return. That is, only 4% of all stocks accounted for all excess market returns compared to government bonds.

    Hendrick Bessembinder writes: “The problem is that I have no idea which companies will generate the most profits over the next 10, 20 years . Possibly these will be the companies that we have never heard of. They might not even exist now. So, if the most of the profits come from a few big winners, that are difficult to determine in advance, it makes sense to diversify your portfolio as much as possible to avoid the risk of not including winners”

    What's your view on trading the stocks? Do you diversify your proftfolio?
    Last edited: Feb 22, 2021
    zdreg and newwurldmn like this.
  2. Srat sounds wrong to me off hand. But no issue with the diversification point.