Reconsidering Returns

Samuel M Hartzmark and David H Solomon

The Review of Financial Studies, 2022, vol. 35, issue 1, 343-393

Abstract: 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.

JEL-codes: G02 G11 G12 G14 N32 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhab015 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:35:y:2022:i:1:p:343-393.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().