The value style of investing isn’t dead yet. But it’s far from in good health. And the academics who discovered it are worried they might have killed it.
As I detailed last week, the value factor (buying stocks that are cheap compared to their fundamentals), has had a dreadful decade. In the U.S., value stocks are now almost as cheap relative to growth stocks as they were during the dot-com bubble. Is this because something has gone permanently wrong with the value effect, which finds that cheap stocks tend to outperform the market in the long run? Or are we in a cycle that will soon see value reassert itself?
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