What Are Stock Investors' Actual Historical Returns? Evidence from Dollar-Weighted Returns

Author: Dichev, Ilia D.

Source: The American Economic Review, Volume 97, Number 1, March 2007 , pp. 386-401(16)

Publisher: American Economic Association

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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.

Document Type: Research article

DOI: http://dx.doi.org/10.1257/000282807780323370

Publication date: 2007-03-01

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The American Economic Review is a general-interest economics journal. The journal is published quarterly and contains articles on a broad range of topics. Established in 1911, the AER is among the nation's oldest and most respected scholarly journals in the economics profession.
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