AgPa #16: Concentrated Stock Markets (7/7)
Mutual Fund Performance at Long Horizons (2022)
Hendrik Bessembinder, Michael J. Cooper, Feng Zhang
SMU Cox School of Business Research Paper No. 22-11 via SSRN, URL
The seventh and final AGNOSTIC Paper on the extreme concentration in stock markets. This one is an out-of-sample test and documents very similar concentration and positive skewness for US mutual funds between 1991 and 2020.
- Longer investment-horizons lead to extremer return distributions – also for mutual funds
- Most active managers underperform passive benchmarks – especially over the long-term
- Compared to the S&P 500, mutual fund investors lost about $1.3T between 1991 and 2020
But a picture is worth a thousand words…