Portraying Compound Returns
(2020) NEKN02 20201Department of Economics
- Abstract
- The results confirm the general claim that extreme skewness is a result of long-term com-pounding induced by a single period standard deviation. The results confirm that the Swedish stock market has the same characteristics as that of the US market. I estimate that the Swe-dish stock market produced 1.2tnSEK wealth 1984 – 2018 – with an extreme concentration of 28 stocks representing all wealth creation. The remaining 461 cancels each other out. On-ly eight stocks represent 50% of all wealth creation. Investors should not reconcile wealth creation with maximum returns. When I build indexes based on quartiles of single period standard deviation, the fourth quartile produces an astonishing 31% annual return 1984 – 2018 compared to 17% from... (More)
- The results confirm the general claim that extreme skewness is a result of long-term com-pounding induced by a single period standard deviation. The results confirm that the Swedish stock market has the same characteristics as that of the US market. I estimate that the Swe-dish stock market produced 1.2tnSEK wealth 1984 – 2018 – with an extreme concentration of 28 stocks representing all wealth creation. The remaining 461 cancels each other out. On-ly eight stocks represent 50% of all wealth creation. Investors should not reconcile wealth creation with maximum returns. When I build indexes based on quartiles of single period standard deviation, the fourth quartile produces an astonishing 31% annual return 1984 – 2018 compared to 17% from the top 28 wealth creators. The results predominantly confirm general knowledge on compounding returns, illustrate its applicability to Swedish historical price data, and further demonstrates the causality of compounding on long-term investment returns. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9015254
- author
- Nordin, Gustaf LU
- supervisor
- organization
- course
- NEKN02 20201
- year
- 2020
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Compound returns, Skewness, Stocks
- language
- English
- id
- 9015254
- date added to LUP
- 2020-08-29 11:19:55
- date last changed
- 2020-08-29 11:19:55
@misc{9015254, abstract = {{The results confirm the general claim that extreme skewness is a result of long-term com-pounding induced by a single period standard deviation. The results confirm that the Swedish stock market has the same characteristics as that of the US market. I estimate that the Swe-dish stock market produced 1.2tnSEK wealth 1984 – 2018 – with an extreme concentration of 28 stocks representing all wealth creation. The remaining 461 cancels each other out. On-ly eight stocks represent 50% of all wealth creation. Investors should not reconcile wealth creation with maximum returns. When I build indexes based on quartiles of single period standard deviation, the fourth quartile produces an astonishing 31% annual return 1984 – 2018 compared to 17% from the top 28 wealth creators. The results predominantly confirm general knowledge on compounding returns, illustrate its applicability to Swedish historical price data, and further demonstrates the causality of compounding on long-term investment returns.}}, author = {{Nordin, Gustaf}}, language = {{eng}}, note = {{Student Paper}}, title = {{Portraying Compound Returns}}, year = {{2020}}, }