What Are Stock Investors’ Actual Historical Returns? Evidence from Dollar-Weighted Returns
Dichev, Ilia D. 2007. "What Are Stock Investors’ Actual Historical Returns? Evidence from Dollar-Weighted Returns."
American Economic Review,
The existing literature typically does not differentiate between security returns
and the returns of investors in these securities. This study clarifies that investor
and security returns differ because of the timing and magnitude of investor
capital flows into and out of these securities. The empirical results indicate that
actual investor returns are systematically lower than buy-and-hold returns for
nearly all major international stock markets. These results imply that the
historical equity premium and the cost of equity capital are likely lower than
previously thought. (JEL G11, G12, G15)
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Dichev, Ilia D.