Stock Investors' Returns are Exaggerated

37 Pages Posted: 16 Nov 2021 Last revised: 29 Nov 2021

See all articles by Jesse M. Fried

Jesse M. Fried

Harvard Law School; European Corporate Governance Institute (ECGI)

Paul Ma

University of Minnesota

Charles C. Y. Wang

Harvard Business School (HBS)

Date Written: November 15, 2021


The stock market generates less wealth than it appears. We show that total shareholder return (TSR), the standard measure of stock investor performance, substantially exaggerates returns earned by these investors in aggregate, and thus by most investors. The main reason: from investors' collective perspective, dividends cannot be reinvested in public equity, as TSR assumes, but only in other lower-yielding assets. In addition, TSR is inflated by well-timed repurchases and equity issuances that merely transfer value among investors. We put forward another measure--"all-shareholder return" (ASR)--which better captures the wealth generated by the stock market for investors. We estimate that the ASR equity premium is 17 to 73% lower than the TSR-implied equity premium, depending on the investment alternative. We also estimate that the wedge between ASR and TSR is primarily driven by the reinvestment effect. However, over time, the reinvestment effect declines while the timing effect of cash flows increases, consistent with rising stock issuances and buybacks.

Keywords: All-shareholder returns; capital flows; dividend reinvestment; equity premium; market timing; total shareholder returns

JEL Classification: G11, G12, G51

Suggested Citation

Fried, Jesse M. and Ma, Paul and Wang, Charles C. Y., Stock Investors' Returns are Exaggerated (November 15, 2021). European Corporate Governance Institute - Law Working Paper No. 618/2021, Available at SSRN: or

Jesse M. Fried

Harvard Law School ( email )

1575 Massachusetts
Griswold Hall 506
Cambridge, MA 02138
United States
617-384-8158 (Phone)


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Paul Ma

University of Minnesota ( email )

19th Avenue South
Minneapolis, MN 55455
United States


Charles C. Y. Wang (Contact Author)

Harvard Business School (HBS) ( email )

Soldiers Field
Boston, MA 02163
United States

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