What Are Stock Investors’ Actual Historical Returns? Evidence from Dollar-Weighted Returns
American Economic Review · 2007 · Volume 97 · Issue 1
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)
Keywords
Portfolio Choice, Investment Decisions, Asset Pricing, Trading Volume, Bond Interest Rates, International Financial Markets
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