Goldman Sachs was founded by Marcus Goldman in 1869 with its headquater placed in New York City, and later on Samuel Sachs joined the firm. Its function and services include global investment banking, investment management, securities, and other financial services, mostly with institutional clients. As of 2013, report said there are 31,700 people employed by Goldman Sachs worldwide.
Blackstone was founded in 1985 in New York City, 116 years later than Goldman Sachs was. The founders were Peter George Peterson and Stephen A. Schwarzman. The group functions as a multinational private equity, alternative asset management and financial services. Their specialties are in private equity, credit and hedge fund investment strategies. Blackstone grew rapidly and became the largest alternative investment firm in the world in 2013.
While accessing monthly data of Goldman Sachs and Blackstone for the period from 1/2012 to 1/2017, I ran some analysis and found these results:
Both of the two stocks produce higher return than SPY. BX being on the upper hand, also carries more risk (higher standard deviation). If we do a regression to know which one is "better" or "worse" according to CAPM theories, we have the two betas representing systematic risks.
Now this looks interesting. Both of them behave better than the market (> 1). However, it indicates here that GS has higher systematic risk, so it should be "rewarded" with higher returns. However, we clearly see that BX has better average return! In order to find out if any of these stocks really "beat the market", I ran another regression and made some calculations.
Comparing these two, BX has more abnormal return (alpha), and all of its measurements: Sharpe Ratio, Treynor's Measure and Information Ratio are also better. GS on the other hand carries negative abnormal return and thus does not beat the market. With this, the myth is no longer. Blackstone is a better choice for your investment, and this is my recommendation of this week.
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