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Working Paper

In this paper the authors review the relative performance of retailers and manufacturers on stock markets in the US, UK, and France over the last two decades. Investors implicitly answer the question of the relative performance of these two sectors when arbitraging their investment choices. This analysis allows five major conclusions.

First, using Total Shareholder Return (TSR) as a criterion the authors find that retailers outperformed manufacturers over this time period in all three countries. Second, this out-performance of retailer stocks can be fully explained by the different risk exposure of a retailer portfolio when compared with a manufacturer portfolio and not by the power gain of retailers.

Third, the relative performance of retailers and manufacturers, with the exception of the 1998-2003 period in the US, was observed to be similar across the US, France and the UK. Fourth, in all three countries studied, large manufacturers and retailers significantly outperformed their smaller colleagues. Fifth, shareholder returns for retailers and manufacturers were verified to be complementary, providing evidence that the common statement that these two sectors are solely engaged in a constant sum battle is wrong and needs to be qualified.

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