What Are Stock Investors’ Actual Historical Returns? Evidence from Dollar-Weighted Returns
American Economic Review
vol. 97,
no. 1, March 2007
(pp. 386-401)
Abstract
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)Citation
Dichev, Ilia, D. 2007. "What Are Stock Investors’ Actual Historical Returns? Evidence from Dollar-Weighted Returns." American Economic Review, 97 (1): 386-401. DOI: 10.1257/aer.97.1.386Additional Materials
JEL Classification
- G11 Portfolio Choice; Investment Decisions
- G12 Asset Pricing; Trading Volume; Bond Interest Rates
- G15 International Financial Markets