Governments are largely insulated from market forces. Companies are not. Investments in stocks therefore carry substantial risk in comparison with holdings of government bonds, notes or bills. The marketplace presumably rewards risk with extra return. How much of a return premium should investors in equities expect? These blog entries examine the equity risk premium as a return benchmark for equity investors.
Much prior research indicates that most stock anomalies fail to deliver due to data snooping in their discovery, post-publication market adaptation and, especially, implementation costs. In their March 2026 paper entitled “Reviving Anomalies”, Heiner Beckmeyer, Florian Berg, Timo Wiedemann and Jonas Wortmann describe and test a framework to address the poor performance of simple long-short portfolios by double-sorting based first on anomaly rules and then on expected next-month net returns of anomaly stocks. They employ machine learning return forecasts based on 153 firm/stock characteristics to compute expected returns. They quantify expected trading frictions with impact of trading scaled by fund size (micro, small, medium and large). Using data for the 153 firm/stock characteristics and return data for a broad sample of U.S. stocks during January 2004 to December 2023, they find that:Keep Reading
How many stocks truly drive U.S. wealth creation? In his March 2026 paper entitled “One Hundred Years in the U.S. Stock Markets”, Hendrik Bessembinder computes investment outcomes for the full lifetime of each publicly listed U.S. common stock over the last 100 years in two ways:
Buy-and-Hold – compounded percentage return with dividends reinvested.
Shareholder Wealth Creation – the change in aggregate shareholder wealth while a stock is listed minus the wealth that would have accrued by instead continuously holding 1-month U.S. Treasury bills (T-bills). This measure accounts for net distributions (dividends, spinoffs, share repurchases, share issuances).
Using monthly prices and distributions for 29,754 U.S. common stocks during January 1926 through December 2025, he finds that:
In response to “Bitcoin Trend Predicts U.S. Stock Market Return?”, a subscriber suggested that bitcoin (BTC) price trend/return may be more strongly predictive of NASDAQ 100 Index (NDX) returns than of S&P 500 Index returns. To investigate, we relate BTC returns to NDX returns at daily, weekly and monthly frequencies. We rationalize the different trading schedules for these two series by excluding BTC trading dates that are not also NDX trading days. Most results are conceptual, but we test three versions of an NDX timing strategy based on prior BTC returns focused on compound annual growth rate (CAGR) and maximum drawdown (MaxDD). Using daily NDX levels and (pruned) BTC prices during 9/17/2014 (limited by the BTC series) through 3/4/2026, we find that:
What are the different ways of estimating the equity risk premium, and which one is best? In his March 2026 paper entitled “Equity Risk Premiums (ERP): Determinants, Estimation, and Implications – The 2026 Edition”, Aswath Damodaran updates a comprehensive overview of equity risk premium estimation. He examines why different approaches to estimating the premium disagree and how to choose among them. Using data from multiple countries (but focusing on the U.S.) over long periods through the end of 2025, he concludes that:Keep Reading
Subscribers asked whether substituting Invesco QQQ Trust (QQQ) for SPDR S&P 500 (SPY) in the Simple Asset Class ETF Value Strategy (SACEVS) and the Simple Asset Class ETF Momentum Strategy (SACEMS) improves outcomes. To investigate, we substitute monthly QQQ dividend-adjusted returns for SPY dividend-adjusted returns in the two model strategies. We then compare the modified performance with the original baseline performance, including: gross compound annual growth rates (CAGR) at various horizons, average gross annual returns, standard deviations of gross annual returns, gross annual Sharpe ratios and maximum drawdowns (MaxDD) based on monthly measurements. In Sharpe ratio calculations, we employ the average monthly yield on 3-month U.S. Treasury bills during a year as the risk-free rate for that year. Using the specified methodology and data to generate SACEVS monthly returns starting August 2002 and SACEMS monthly returns starting July 2006, all through February 2026, we find that:
A buffer exchange-traded fund (ETF) is designed to limit losses while capping gains over a specific period, usually one year, generally by combining a position in put and call options on a stock index with an ETF that tracks that index. Laddered buffer ETFs smooth this approach by holding a rolling series of buffer ETFs with staggered expiration dates, thereby imposing two layers of fund costs. How do laddered buffer ETFs perform? To investigate, we consider five of the largest such ETFs, all currently available, as follows:
We use SPDR S&P 500 ETF Trust (SPY) as the benchmark for the first four and Invesco QQQ Trust (QQQ) for the last. We focus on monthly return statistics, along with compound annual growth rates (CAGR) and maximum drawdowns (MaxDD). Using monthly total returns for the five laddered buffer ETFs, SPY and QQQ as available through February 2026, we find that:
A subscriber asked about an assertion that bitcoin (BTC) price trend/return predicts return of the S&P 500 Index (SP500). To investigate, we relate BTC returns to SP500 returns at daily, weekly and monthly frequencies. We rationalize the different trading schedules for these two series by excluding BTC trading dates that are not also SP500 trading days. Most results are conceptual, but we test three versions of an SP500 timing strategy based on prior BTC returns focused on compound annual growth rate (CAGR) and maximum drawdown (MaxDD). Using daily SP500 levels and (pruned) BTC prices during 9/17/2014 (limited by the BTC series) through 3/4/2026, we find that:
Do exchange-traded funds (ETF) designed to make private equity accessible to individual investors beat the market? To investigate, we consider four ETFs, as follows:
Invesco Global Listed Private Equity ETF (PSP) – invests in 40 to 75 private equity companies, including business development companies, master limited partnerships, alternative asset managers and other entities that are listed on a nationally recognized exchange.
VanEck BDC Income ETF (BIZD) – invests at least 80% of its total assets in securities associated with its benchmark (Business Development Company) index.
ProShares Global Listed Private Equity ETF (PEX) – invests in the most actively traded companies that directly hold private equity, or in instruments with similar economic characteristics.
ERShares Private-Public Crossover ETF (XOVR) – provides institutional-style access to the pre-IPO economy without closed-end premiums, lockups, or interval-fund gates.
Are plans to use nuclear power to provide electricity for proliferating data centers driving attractive performance for uranium exchange-traded-funds (ETF)? To investigate, we consider four such ETFs, all currently available:
Global X Uranium ETF (URA) – picks stocks of global companies involved in the uranium industry.
Sprott Uranium Miners ETF (URNM) – picks stocks of firms devoting at least 50% of assets to mining of uranium, holding physical uranium, owning uranium royalties or engaging in other activities that support uranium mining.
Sprott Junior Uranium Miners ETF (URNJ) – picks stocks of small firms devoting at least 50% of assets to mining of uranium, holding physical uranium, owning uranium royalties or engaging in other activities that support uranium mining.
How do exchange-traded-funds (ETF) focused on data centers, an arguably hot theme, perform? To investigate, we consider four such ETFs, all currently available, as follows:
We use Invesco QQQ Trust (QQQ) as a benchmark, assuming investors look at data center stocks as a way to beat other technology stocks. We focus on monthly return statistics, along with compound annual growth rates (CAGR) and maximum drawdowns (MaxDD). Using monthly total returns for the four data center ETFs and QQQ as available through January 2026, we find that:Keep Reading
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