For the period 1983-2008...about 20 percent of stocks lost nearly all of their value.
If you excluded the top 10 percent of performers, the return would have been only 6.2 percent. If you exclude the top 25 percent, the return becomes slightly negative at -0.6 percent -- the top 25 percent of performers accounted for more than 100 percent of the returns. Of course, if one could eliminate the bottom 10 or 25 percent of the performers, returns would increase just as dramatically.
Might it be that small cap value, stocks with perhaps book value > share price, are inclined to have fewer total failures - and as such relatively outperform?
Assuming a tactic of elimination of the bottom 10 or 25 percent, small, low book value to price i.e. small cap growth might be a reasonable broad filter.Migration by Fama & FrenchThe size premium is due almost entirely to the extreme positive returns of small stocks that move to a big stock portfolio from one year to the next. Three factors contribute to the value premium. (i) Plus transitions, with their high returns, occur more often for value stocks than for growth stocks. (ii) Minus transitions and their low returns are more likely for growth stocks. (iii) Value stocks that remain in the Same portfolio from one year to the next have higher average returns than the matching (small or big) growth stocks.