Exploring Long-Run Skewness of Stock Returns and Their Relative Performance to Treasury Bills

Abstract

We study whether Treasury bills are able to outperform the stock market, over long horizons, by comparing lifetime buy-and-hold returns and wealth creation of US individual common stocks to US Treasuries from 1926 to 2022. Additionally, we investigate how market, size, and value factors influence equity performance using the Fama-French three-factor model. We find that Treasury bills, in fact, outperform about 97% of the stock market. This result can help explain why market averages often outperform active strategies with lacking diversification.