ALFRED COWLES 3RD 313 TWENTY FIRE INSURANCE COMPANIES The second analysis deals with the common stock investments, from 1928 to 1931 inclusive, of 20 of our leading fire insurance companies Its significance lies in the fact that these companies are representative of a class of common stock investor which has had long years of experi ence and large amounts of capital at its disposal. Fire insurance dates from the great London Fire of 1666, and active investment in stocks developed during the nineteenth century. The fire insurance companies are much older hands at the business of investment than either the financial services, which are a twentieth century product, or American investment trusts, which are largely a development of the last few years. The investment policies of these companies are based on the ccumulated knowledge of successive boards of directors whose judg ment might be presumed, over the years, to have been well above that of the average investor. The 20 companies which were selected for analysis hold assets totalling several hundred million dollars, and seem a fair sample of their kind Fire insurance companies carry between 20 and 30 per cent of their total investments in common stocks Their average turnover amounts to only some 5 per cent a year For this reason it was thought best to confine our analysis to the record of the actual purchases and sales made during the period under examination, rather than to compute the record of the entire common stock portfolio. To simplify the labor, allitems of stock purchased were given equal weights, regardless of the amounts involved. While the conclusion does not exactly refect the actual investment results secured by these companies, it should, how ever, provide a satisfactory test of the success of these organizations in selecting stocks which performed better than the average The method employed in the analysis is essentially the same as that ed in the case of the investment services. a second purchase of an item was omitted from the record unless a sale of this item intervened A record of the sale of an item, of course determined the date as of which it was dropped from the list. Also, any item of which there had been no purchase recorded for 12 months was automatically considered The compounded records of the 20 companies for the 4-year are shown in Table It Six of the companies show evidence of success, and the average of the 20 is -4.72 per cent. The average record of the companies in the stocks which they selected for investment fell below the average of the stock market at the effective annual rate of 1. 20 per cent. a comparable result could have been achieved through a purely random selection of