Too big to succeed: Are leading corporates set for a fall?

Academic research has found companies recognised as sector or market leaders represent "dismayingly unattractive" prospects for investors over the next decade.

The study, entitled The Winner's Curse: Too Big To Succeed?, reports that companies who rise to become number one by market capitalisation in their sector are typically punished - often severely - in subsequent market action. Authors Robert D Arnott and Lillian Jing Wu found that 59% of ‘top dog' US companies underperformed their own sector in the following year, with two-thirds lagging their sector over the subsequent decade. A "daunting magnitude" of average underperformance by such companies sees their share prices trail their sectors by between 300bps and 400bps per year over the ...