This post is a summary of an abstract to the paper by Arnott and Wu 2012: The Winners Curse: Too Big To Succeed? You can download the full article for free.
We find a statistically significant tendency for top companies in each sector to underperform both the overall sector and the stock market as a whole. In an earlier U.S.-only study, we found that 59% of these Top Dogs underperformed their own sector in the next year, and two-thirds lagged their sector over the next decade. We found a daunting magnitude of average underperformance, averaging between 300 and 400 bps per year, over the next 1 to 10 years.
Outside the United States, the Sector Top Dogs generally underperform their own sector even more relentlessly than in the United States!