Do Global Stocks Outperform US Treasury Bills?

Bessembinder, Hendrik; Chen, Te-Feng; Choi, Goeun

doi:10.2139/ssrn.3415739

Cited by 13 publications

(5 citation statements)

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“…A Schumpeterian framework helps surface profits and growth as important sources of global power and thus motivators for state policy. As Bessembinder et al (2020;Bessembinder, 2018) show, only a handful of firms-a mere 811 firms out of 62,000 listed firms globally from 1990 to 2020-generate significant excess returns above their cost of capital rather permissively measured as the return on a one-month US Treasury bill. Those profits are a significant part of geopolitical power, by partially determining whose economy will grow and whose firms will have the ability to take control of other firms.…”

Section: The Big Picturementioning

confidence: 99%

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The European Union, the United States, and Trade: Metaphorical Climate Change, Not Bad Weather

Schwartz

2022

PaG

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US and EU trade relations exhibit a set of chronic and secularly unsustainable imbalances, in which new Schumpeterian leading sectors and catch-up growth create growing tension in the asymmetrical and somewhat hierarchical US–EU relationship. These imbalances exhibit two distinct cycles interrupted by a clear structural break in the 1970s and an emerging cycle after the 2008–2010 crises. Each cycle has seen rising US current account or trade deficits with Europe provoke some financial or political crisis. Each crisis produced a US-led solution producing even greater imbalances in the next cycle, with concomitant stress on the asymmetric US–EU relationship. The EU and particularly the northern eurozone economies typically have relied on export surpluses for growth. But relying on export surpluses for growth reinforces EU dependence on the US and the US dollar at a time when US domestic politics are increasingly hostile to trade deficits and tension with China is rising.

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Section: The Big Picturementioning

confidence: 99%

“…The EU as a whole meanwhile performed under par, and the eurozone even more so, reflecting the absence of the UK, Sweden, and Denmark. Table 1 shows the aggregate effects of the concentrated excess returns Bessembinder et al (2020) document.…”

Section: The Breakdown Of Bretton Woods 1 and The Shift To Bretton Woodsmentioning

confidence: 99%

The European Union, the United States, and Trade: Metaphorical Climate Change, Not Bad Weather

Schwartz

2022

PaG

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“…However, stock issues by such enterprises fell suddenly, by more than 80%, between 2000 and 2002. Bessembinder (2018) and Bessembinder et al (2020) show that the long-term performance of the majority of US stocks fall short of returns on one-month US treasury bills, and that the widely published average yields and wealth creation are attributable to the very large positive returns on a relatively few stocks. Many investors clearly do not understand or ignore the poor performance on most equity investments [4].…”

Section: Prior Literature and Trendsmentioning

confidence: 99%

“…4. According to Bessembinder et al (2020), these firms are Apple, Microsoft, Amazon, Alphabet, and Tencent.…”

Section: Notesmentioning

confidence: 99%

Valuation of short-lived firms following waves of new listings

Saito

2021

IJMF

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PurposeThe survival rate of newly listed firms is low, and there is evidence of a surge of poorly performing new listed firms leading up to the crash of the dot.com bubble. The author investigates this phenomenon and analyzes investors' ability to understand the quality of accounting information and to adjust their expectations.Design/methodology/approachThe author employs the dividend discount model in conjunction with clean surplus accounting discussed by Ohlson (1995) to compare the value relevance of earnings and research and development (R&D) expenditures for short and longer listed National Association of Security Dealer Automated Quotations (NASDAQ) firms between 1980 and 2014. The author also uses univariate tests and logistic regression to analyze both recently listed and short-listed firms. In this analysis, the author compares the differences in investors' expectations for the first five years for both types of firms.FindingsThe author provides convincing evidence that markets clearly placed lower valuation weights on accounting earnings and R&D expenditures for short-listed firms on NASDAQ. Market participants originally had high expectations for these ventures. But, they gradually understood the lower quality of accounting information and adjusted their expectations downward.Originality/valueThe author’s results show that optimistic expectations along with easy equity financing created a surge of new listings. My analysis of the interplay between the quality of accounting information and investors' expectations indicates a negative spillover effect where investors are overoptimistic about firms that rode on waves of new listings backed by liberal financing. The author shows that analysis of Tobin's Q and negative earnings can separate ill-prepared from longer-listed firms.

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“…Empirically, Bessembinder (2018) shows that 52% of the 25,782 firms ever appearing in US equity markets from 1926 to 2015 had equity returns at or below the returns from simply holding a series of one-month US Treasury bills – an extremely forgiving proxy for their cost of capital. Similarly, 811 firms out of 62,000 listed firms globally from 1990 to 2018 account for all excess returns (Bessembinder et al., 2019: 3). The flow of dividends and capital gains from the majority of firms was below the flow of interest obtained from holding one-month Treasury bills, suggesting that gross profit was used to replace depreciated capital, and that most firms do not generate any durable monopoly rents.…”

Section: Profit Iprs and Monopolymentioning

confidence: 99%

Intellectual property, technorents and the labour share of production

Schwartz

2020

Competition & Change

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How does the capture of explicit monopoly rent via intellectual property rights interact with the capture of additional profit via monopsonistic labour markets, and with what consequences? Most analyses of changes in the labour market focus on the distributional struggle between capital and labour over the wage share. This paper examines how the distributional struggle among firms over shares of aggregate profit has affected the labour market, generating rising income inequality. Over the past 40 years, struggles over shares of the value generated in a given commodity chain have driven de jure but not de facto vertical disintegration of those value chains. Firms vertically disintegrated by outsourcing non-core production and support activities, by in-sourcing contingent labour, and, where possible, by adopting a franchise model of corporate organization. The franchise model enables core firms to exert near total control over firms that are technically separate legal entities, while avoiding legal and social responsibility for the workers (and owners) of those subordinate firms. Vertical disintegration has produced three ideal typical kinds of firms whose differing ability to capture value and thus profit stems from their different forms of control over other firms in the value chain. Vertical disintegration generated labour shedding and employment contingency. Differential value capture has concentrated profit into firms with relatively small headcounts, reducing the degree to which profits are (partially) redistributed among workers.

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Do Global Stocks Outperform US Treasury Bills?

Cited by 13 publications

References 0 publications

The European Union, the United States, and Trade: Metaphorical Climate Change, Not Bad Weather

The European Union, the United States, and Trade: Metaphorical Climate Change, Not Bad Weather

Valuation of short-lived firms following waves of new listings

Intellectual property, technorents and the labour share of production

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