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Equities: Value Investing and the Value Factor

The best recent research on equity value and the value factor

One of the most popular approaches to generating alpha in equity portfolios is to follow a value strategy - underweighting shares in companies perceived as "dear" and overweighting those which are seen as "cheap". The "value factor" (although constructed differently by different firms) is one of the key factors deployed by proponents of a "factor investing" style of equity investing.

In the list below, we highlight some of the best, recent papers, which examine the efficacy of value investing and how it might best be implemented.

value factor

Value First (Oldfield Partners, 2019)

Portfolio managers from Oldfield Partners discuss specific contrarian value opportunities that have arisen within global equity markets, as well as valuation traps and QE-driven style drifts by equity investors.

Value: A Practitioner's Guide (S&P Dow Jones Indices, 2019)

In a manner that echoes back to Graham and Dodd, price-to-earnings, price-to-sales, and price-to-book-value ratios are used to illustrate the process of uncovering value. These ratios are then incorporated into the construction of the S&P 500 Enhanced Value Index, and the relative performance of this index is analyzed.

FTSE Fixed Income Factor Research Series – The Value Effect (FTSE Russell, 2018)

FTSE Russell looks at the value factor in fixed income, using an OAS framework to designate undervalued and over-valued securities. This study focuses upon the US investment grade corporate bond market.

Constraining Optimized Portfolios: Handle with Care…Focus on Global Value (Axioma, 2018)

This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a Global Value portfolio.

Deep Dive into the Value Factor (Alpha Architect, 2019)

Alpha Architect dives into an analysis of the value factor, covering an overview of recent value premia research, an explanation of value as it relates to E/P, B/P, earnings growth, and behavioral finance.

Value Investing: Bruised by 1000 Cuts (GMO, 2019)

GMO examines the historical battle between growth and value, as well as the drivers behind value's recent underperformance and present-day tailwinds for value investors.

When Value Goes Global (Research Affiliates, 2018)

Evidence from the international equity, currency, and bond markets point towards the existence of a global value premium, but successful implementation of such a global value strategy depends on a well-structured design.

The Carry and Value Pendulum (PIMCO, 2016)

Alternative risk premia portfolios are becoming increasingly popular as many investors look to build returns and diversification. In this paper, the authors focus their discussion on Carry and Value in particular.

Building a Better Deep Value Portfolio: Difficulties Mastered Are Opportunities Won (AQR, 2017)

AQR defines deep value opportunities, then describes a particular approach that addresses some of the typical challenges encountered when attempting to deploy a deep value strategy.

Value and Momentum Everywhere (Asness, Moskowitz and Pedersen, 2013)

In this paper, the value and momentum factors are examined across multiple markets and multiple asset classes, exhibiting a negative correlation. The authors attribute a portion of this relationship to global funding liquidity risk.