Exponential growth in the stock market is a mathematical myth that rarely happens for actual investors.
April 26, 2026
Original Paper
Exponentiality is Not an Assumption: An Ex-Post Valuation Model Based on Observed Asset Trajectories
SSRN · 6585878
The Takeaway
Asset trajectories show that most global stocks exhibit linear growth rather than the compound interest everyone expects. Financial advisors teach that patient reinvestment leads to a sudden and massive explosion of wealth. Empirical data from 73 stocks proves that this narrative does not match the historical reality of most assets. Investors who wait for a magic hockey-stick curve are often disappointed by steady, flat progress. This challenges the common sense of long-term investing by showing the math of the real world is much slower.
From the abstract
<div> The narrative that investing in stocks is equivalent to harnessing compound interest suggests that patient reinvestment would lead to exponential growth of wealth. This paper challenges this premise by proposing a simple yet overlooked metric: the Temporal Exponentiality Factor (E). To compute E, two models are fitted to the same price series – a linear model and an exponential model (via logarithmic regression, with predictions converted back to the original scale) – and their coefficient