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Returns to investors in stocks in new industries

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  • Gerald P. Dwyer, Jr.
  • Cora Barnhart

Abstract

We examine the returns to investors in publicly traded stock in new industries. We examine data from the United States on sellers of own-brand personal computers, airlines and airplane manufacturers, automobile manufacturers, railroads, and telegraphs. We find that a relatively small number of companies generate outstanding returns and many firms fail. Firms in new industries typically have high volatility of individual stocks' returns. Compared with indexes for the same period, expected returns of firms are higher for two industries, lower for one industry and roughly the same for two industries. Portfolios of firms in new industries generally have lower Sharpe ratios than the overall market.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2008-21.

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Date of creation: 2008
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Handle: RePEc:fip:fedawp:2008-21

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Keywords: Investments;

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  1. Goetzmann, William N. & Ibbotson, Roger G. & Peng, Liang, 2001. "A new historical database for the NYSE 1815 to 1925: Performance and predictability," Journal of Financial Markets, Elsevier, vol. 4(1), pages 1-32, January.
  2. Garbade, Kenneth D & Silber, William L, 1978. "Technology, Communication and the Performance of Financial Markets: 1840-1975," Journal of Finance, American Finance Association, vol. 33(3), pages 819-32, June.
  3. Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(4), pages 4-23.
  4. Paul A. Gompers & Josh Lerner, 2003. "The Really Long-Run Performance of Initial Public Offerings: The Pre-Nasdaq Evidence," Journal of Finance, American Finance Association, vol. 58(4), pages 1355-1392, 08.
  5. Cochrane, John, 2000. "The Risk and Return of Venture Capital," University of California at Los Angeles, Anderson Graduate School of Management qt7qm9h594, Anderson Graduate School of Management, UCLA.
  6. anonymous, 1978. "Communication," Management Science, INFORMS, vol. 24(9), pages 919-919, May.
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Cited by:
  1. Ramon P. DeGennaro & Gerald P. Dwyer, 2010. "Expected returns to stock investments by angel investors in groups," Working Paper 2010-14, Federal Reserve Bank of Atlanta.

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