The Resurgence of Value? The Bursting of a Bubble?
September has been an extraordinary month for equity style factors, with momentum and quality factors selling off and stocks with value characteristics enjoying a resurgence. Does this mark the reversal of a long period of under-performance for value? QMA argues that the outperformance of expensive stocks over the last 18 months has created a bubble which is ready to be popped.
The papers listed below examine recent style factor performance, comment on long term factor performance trends, and seek to help investors understand the outlook for equity factor returns. What defines the dynamic between value and growth and the preference of investors for one style over the other? Read on for more insights...
Cheap stocks have been underperforming recently, while expensive stocks have been outperforming. In some ways, this mirrors the GFC and the Tech Bubble. QMA takes a look at Value vs Growth dynamics.
Focusing on companies that can benefit from upward trends in consumer spending can mean zeroing in on stocks with high valuations.
For compliance reasons, this paper is only accessible in North America and South America
Given the volatility in today's markets, US investors are currently paying a premium for companies that have high dividend yields. Has this practice gone too far?
The authors examine the apparent demise of value investing and argue that, in reality, value investing has been unprofitable for nearly thirty 30 years (except for the post-tech bubble). They suggest two reasons for this: firstly accounting deficiencies, which cause "value" to be misidentified, and secondly fundamental secular trends, which have undermined the value strategy. Will there be a resurgence of value investing? The authors think it unlikely.
For compliance reasons, this paper is only accessible in the UK & Europe
Can the resurgence of value last? Fidelity describes a recent sell off in overcrowded growth equities and a rally in value stocks.
MSCI examines the performance of growth stocks. Has their performance been anomalous? It depends on your definition of growth and which tier of growth stocks you're looking at.
Has the Factor World Gone Mad and Are We on the Brink of Another Quant Crisis? (Axioma blog, Sep 2019)
Factor returns over the past several weeks have been behaving erratically. This Axioma blog post describes an unusual pattern of returns for Momentum and Value style factors.
What explains the poor performance of factor strategies over the last 3 years? (Scientific Beta, 2019)
This 30 page document examines why many factor strategies have underperformed in recent years, not due to poor factor performance, but due to poor implementation. For instance, some strategies have failed to control for market beta and have therefore missed out on equity performance during market rallies.
AQR conducts a comprehensive study of factor timing, examining factor premia (value, carry, momentum, defensive) for six asset classes and over a century of return data.
Has the value premium eroded over time? GMO looks at the performance of value stocks over the past decade.
Equity valuations in Europe appear to be attractive, but is this a value trap?
Lazard Asset Management reviews growth, value, sentiment, quality, and risk factor returns across multiple equity markets in a report that's updated on a monthly basis.
Robeco has designed this self-study, educational module to introduce investors to the essential elements of factor investing
This paper examines the definitions used in investment products and tools and compares thoose definitions with those used in academically-grounded research. The report also highlights the shortcomings of some implementation strategies in common use.