Winner-Take-All Phenomenon Rules the Stock Market, Too
Any gains are attributable to a relative handful of companies.
Bloomberg, July 29, 2019
The winner-take-all phenomenon is well-documented among sports stars, pop singers, fiction authors, actors and hedge-fund managers — those at the top reap fabulous rewards while everyone else scrapes to get by.
It turns out the same hold true in the stock market: Just 1.3% of the world’s public companies account for all the market gains during the past three decades. Outside the U.S., the gains are even more concentrated, with less than 1% of all equities driving all of the net appreciation in share prices.
distributed. Ardent stock pickers who read the paper might find themselves turned into indexers as a result of what they see.
The lead author of the paper, Hendrik Bessembinder of the Carey School of Business at Arizona State University. He is also the managing editor of the Journal of Financial and Quantitative Analysis, a position he’s held since 2003.
Bessembinder and the rest of his researchers looked at 62,000 global common stocks from 1990 to 2018, and ranked them on a compounded, total-return basis. That period includes two decade-long market expansions, from 1990 to 2000 and 2009 through 2018, as well as two major market crashes in 2000 and 2008. These periods, encompassing bear and bull cycles, make it less likely that the findings are due to anomalies or one-off events.