The data behind this research does not include the wealth created before a company went public.

If it did, imagine how many more tech companies would be in the top 1% of global net wealth creation.

Some quotes from the research paper:

"Indeed, by our calculations, stocks traded in the public global markets created over $US 44.7 trillion in shareholder wealth during the twenty-nine-year sample period, over and above outcomes that would have prevailed if the invested capital had earned US Treasury-bill returns. The distinction between the positive return premium (in excess of Treasury bills) for the overall stock markets and the negative premium for most individual stock returns is attributable to strong positive skewness in returns to individual stocks, particularly at longer horizons. Simply put, the positive mean excess return for the broad stock market is driven by very large returns to a relative few stocks, not by positive excess returns to typical stocks."

-

"Summing across the 61,100 firms that issued common stock contained in the January 1990 to December 2018 sample, we calculate net global stock market wealth creation of $US 44.74 trillion, measured as of December 2018. Focusing only on the 23,905 firms with positive value creation, we calculate gross stock market wealth creation of $US 66.57 trillion dollars. That is, the majority (37,195, or 60.9%) of firms generated negative wealth for their investors, reducing full sample wealth by $US 21.83 trillion.

We show that the five firms (0.008% of the total) with the largest wealth creation during the January 1990 to December 2018 period (Apple, Microsoft, Amazon, Alphabet, and Exxon Mobile) accounted for 8.27% of global net wealth creation and 5.56% of global gross wealth creation.The best performing 306 firms (0.5% of total) accounted for 73.03% of global net wealth creation and 49.08% of global gross wealth creation. The best performing 811 firms (1.33% of total) accounted for all net global wealth creation, and 67.20% of gross global wealth creation."

-

"The results are also relevant to the debate regarding active stock selection vs. the passive holding of broadly diversified stock indices. The results here show that the wealth created by stock market investing is largely attributable to positive outcomes to a relatively few stocks. For those investors without a comparative advantage in identifying the few stocks that will create the most wealth (or in selecting a manager with the ability to do so) and without a substantial preference for positive skewness, the results reinforce the desirability of investing in a broad passive index. On the other hand, for the (presumably few) investors with the appropriate comparative advantage, the results highlight the degree to which successful stock selection can enhance wealth."

-

Out of 61,100 companies, 811 account for $45 trillion created from 1990 to 2018.

That's 2/3rds of the total global wealth created.

If you know what companies to invest, concentrate.

Otherwise, diversify.

-

Follow me on:

Linkedin - https://www.linkedin.com/posts/marcelinopantoja_public-equity-research-global-stock-vs-activity-6821178944914538498-p8U-/

Twitter - https://twitter.com/marcepntoja/status/1415436441165832193