More on the Distribution of Stock Returns

Last week, I discussed the distribution of stock gains. I speculated that the fat tails is probably very significant. It hints that there may be “great stocks” whose returns make up an unusually large share of the market’s gains.
I looked at the market’s gains this decade. Here’s the distribution of gains for over 3,500 stocks since December 31, 1999 (I used a log scale):

The x-axis shows is the stocks ranked from worst to best (left to right). The y-axis is the log of the gain.
The median stock is a loss of 20%. Over 57% of stocks are down for the decade. Even the stock at the 25th percentile is up about 70% which isn’t that great for a decade’s work.
Just by eyeballing the chart, the appears to be major turn northward at around point 3400 which corresponds with a gain of over 500%.
Here’s the raw data. I’d welcome if anyone could make a histogram based on standard deviation points. I strongly doubt that it’s symmetrical.
Update: Don Fishback was good enough to bring his charting skillz to us. Check out his post. What strikes me is the leftward tilt of the distribution. Lots of underperformers. It’s like Wall Street is a reverse Lake Wobegon.
Another Update: A reader provides a graph of returns by standard deviation. Notice how the peaked is to the right of 0.

Posted by Eddy Elfenbein on April 21st, 2009 at 2:45 pm

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