Reconsidering Returns

67 Pages Posted: 22 Jun 2020 Last revised: 18 Nov 2021

See all articles by Samuel M. Hartzmark

Samuel M. Hartzmark

University of Chicago - Booth School of Business

David H. Solomon

Boston College - Carroll School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: June 2020


Investors' perception of performance is biased because the relevant measure, returns, is rarely displayed. Major indices ignore dividends thereby underreporting market performance. Newspapers are more pessimistic on ex-dividend days, consistent with mistaking the index for returns. Market betas should track returns, but track prices more than dividends, creating predictable returns. Mutual funds receive inflows for “beating the S&P 500,” price index based on net asset value (also not a return). Investors extrapolate market indices, not returns, when forming annual performance expectations. Displaying returns by default would ameliorate these issues, which arise despite high attention and agreement on the appropriate measure.

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Suggested Citation

Hartzmark, Samuel M. and Solomon, David H., Reconsidering Returns (June 2020). Available at SSRN: or

Samuel M. Hartzmark (Contact Author)

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States

David H. Solomon

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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