Dollar-Weighted Returns to Stock Investors: A New Look at the Evidence

Abstract

Dichev (2007, American Economic Review), in an influential paper, examines the gap between the performance of major stock markets and the dollar-weighted performance of investors in these markets. He finds a significant gap of 1.3 percent per year for NYSE/AMEX and 1.5 percent internationally. We question these results. The NYSE/AMEX performance gap is actually negative in the last two thirds of Dichev's 1926-2002 period, while his international results are influenced by a dramatic increase in Datastream's coverage. When, instead of Datastream, we use a comprehensive share price database, the U.K. performance gap changes from 1.1 to -1.3 percent. In short, Dichev's findings are not robust.