Daily Archives: Oct 18, 2019 at 07:34 am EST

Research Review | 18 October 2019 | Portfolio Design And Analysis

Explaining the Demise of Value Investing
Baruch Lev (NY University) and Anup Srivastava (U. of Calgary)
August 25, 2019
The business press claims that the long-standing and highly popular value investing strategy—investing in low-valued stocks and selling short high-valued equities—lost its edge since 2007. The reasons for this putative sudden demise of value investing elude investors and academics, making it a challenge to assess the likelihood of the return of value investing to its days of glory. Based on extensive data analysis we show that the strategy has, in fact, been unprofitable for almost 30 years, barring a brief resurrection following dotcom bust. We identify two major reasons for the demise of value: (1) accounting deficiencies causing systematic misidentification of value, and particularly of glamour (growth) stocks, and (2) fundamental economic developments which slowed down significantly the reshuffling of value and glamour stocks which drove the erstwhile gains from the value strategy. We end up by speculating on the likelihood of the resurgence of value investing, which seems low.

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Macro Briefing | 18 October 2019

Turkey agrees to temporarily halt military operations in Syria: WSJ
UK Parliament expected to reject Johnson’s new Brexit deal on Saturday: CNBC
China’s Q3 annual economic growth slows to 6.0%–lowest in decades: CNBC
A variety of financial risks from climate change are lurking: SF Fed
Housing starts in the US fell in September after reaching 12-year high: MW
US jobless claims continue to predict labor market expansion: CNBC
Philly Fed’s mfg index shows modest growth for October: Philly Fed
US industrial output’s 1-year trend was negative in Sep–first decline since 2016: