Value Investing Isn’t Broken (Part 1)

The payoff to value stocks will probably behave more like a risk premium going forward.

Alex Bryan 03 July, 2020 | 19:27
Facebook Twitter LinkedIn

Has the market become so efficient that the time has come to abandon value index funds? Information is more widely available now than ever, and the resources dedicated to processing and acting on it have never been greater. As a result, significant mispricing is less likely now than in the past. Yet despite these advancements and value stocks’ lengthy stretch of underperformance, it’s premature to give up on value index investing.

Is Value Investing Broken?

Value stocks have been out of favor for a long time. The Russell 3000 Value Index has lagged the Russell 3000 Growth Index by a staggering 5.9 percentage points annualized from the end of 2006 through May 2020. That’s enough to try almost any investor’s patience. It’s the longest stretch of underperformance U.S. value stocks have ever experienced.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free
Facebook Twitter LinkedIn

About Author

Alex Bryan

Alex Bryan  is the Director of Passive Fund Research with Morningstar.

© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies