WealthShape | Smarter Investing | Fiduciary Advice
  • About
    • Who We Are
    • How We Invest
    • Portfolios
  • Services
    • Wealth Management
    • Financial Planning
    • Retirement Plan Services
  • Blog
  • FAQ
  • Log In
  • Contact

Is Now a Good Time for Value?

2/11/2022

 
After a strong year for the value premium, investors are curious about what that means for value performance for this year. 

​
ANNUAL VALUE PREMIUM AND FOLLOWING YEAR VALUE PREMIUM
US Market, 1927–20211 
Picture

  • Value stocks are expected to perform better than growth stocks every day, because a lower relative price is associated with a higher expected return.
  • Historical data suggest a positive value premium regardless of its performance in the prior year.
  • To evaluate the value premium’s performance from one year to the next, we first arranged years based on the annual value premium, then looked at the next year’s performance.
  • The top quartile years— those with the strongest value premium performance— were followed by an average annual value premium of 4.74%. The bottom quartile— or the weakest years for the value premium— were followed by an average annual value premium of 4.35%.​

​Investors haven’t missed the boat. Staying consistent in your exposure to the value premium can be the most reliable way to capture long-term returns. 
​
Data Appendix
1. Returns for 2021 are through the year-to-date period ending November 30, 2021. Returns less than one year are not annualized.
​2. Yearly premiums in top chart are arranged from low to high rather than chronologically, covering 1927-2021. Premiums in bottom chart are arranged in the order of the top chart, but one year later in each instance, to show next-year performance. 

Past performance is not a guarantee of future results. Actual returns may be lower. Investing risks include loss of principal and fluctuating value. There is no guarantee an investment strategy will be successful. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

In USD. Annual value premium is the return difference between the Fama/French US Value Research Index and the Fama/French US Growth Research Index. Source: CRSP and Compustat data calculated by Dimensional. Fama/French data provided by Fama/French.
Fama/French US Value Research Index: Provided by Fama/French from CRSP securities data. Includes the lower 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Fama/French US Growth Research Index: Provided by Fama/French from CRSP securities data. Includes the higher 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP. This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. 

    By Tim Baker, CFP®

    Advice and investment design should rely on long term, proven evidence. This column is dedicated to helping investors across the country, from all walks of life to understand the benefits of disciplined investing and the importance of planning.

    Get the WealthShape Newsletter

    Archives

    March 2023
    October 2022
    July 2022
    May 2022
    February 2022
    November 2021
    June 2021
    May 2021
    March 2021
    January 2021
    December 2020
    October 2020
    September 2020
    June 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    September 2019
    July 2019
    June 2019
    May 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    September 2018
    August 2018
    June 2018
    May 2018
    April 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    September 2015

Phone: 860-837-0303
Message: info@wealthshape.com
WINDSOR
360 Bloomfield Ave 
3rd Floor 
Windsor, CT 06095
WEST HARTFORD
15 N Main St
​#100
West Hartford, CT 06107
SHELTON
One Reservoir Corporate Centre 
4 Research Dr - Suite 402 
Shelton, CT 06484
ROCKY HILL
175 Capital Boulevard 
4th Floor 
Rocky Hill, CT 06067
Schedule a Consultation
Get Our Newsletter
Home  I  Who We Are  I  How We Invest  I  Portfolios  I  Financial Planning  I  Financial Tools  I  Wealth Management  I  Retirement Plan Services  I  Blog  I  Contact  I  FAQ  I   Log In  I  Privacy Policy  I  Regulatory  & Disclosures
Picture
Picture
Picture
Picture
Picture
Picture
Picture

© 2023 WealthShape. All rights reserved. ​
Photos used under Creative Commons from GotCredit, jeffdjevdet
  • About
    • Who We Are
    • How We Invest
    • Portfolios
  • Services
    • Wealth Management
    • Financial Planning
    • Retirement Plan Services
  • Blog
  • FAQ
  • Log In
  • Contact