actually it is in the curriculum. fama french goes to town on that subject. as well as most research providers ive seen. the reason being because people overpay for growth too often.
Is it really? I’ve read the fama/french papers, didn’t realize CFA has put them into the curriculum. That’s great to hear.
Specifically what I was mentioning was that I’ve seen analysis that active value investors underperform a passive value index by more than the active growth guys underperform the passive growth index. The stats were in a Damadoran lecture but I doubt I could find it now. I think he actually presented it at a CFAI event. But I’m not wedded to the statement, other than people draw the conclusions that value beats growth therefore the same should be true for active management in those styles. But turns out there is more to it, it seems. And yes, you could underperform your index but still outperform the other index. I’m specifically talking about active versions of the factor
Interesting, I haven’t heard that before. I’m wondering what would be different about value stocks relative to growth stocks that would cause there to be a different dynamic. For one to outperform less frequently than the other would suggest that there are a small group of really big winners and a larger group of underperformers. I could see that being true in an area of the market like small cap growth, where companies are trying to invent the next world changing product or service. I’m less sure on how that dynamic could exist in value stocks.
FWIW here is a similar study done by morningstar. The results show higher success rates for value active managers than growth active managers, though of course the aggregate underperformed their benchmarks in both areas of the market. The study is too short term, just 10 years, so I wouldn’t draw any conclusions off of it and you may very well be right. But a study like this over the past 100 years would be great if you could find it.
anyone catch the documentary?
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I plan on watching it tonight.
Have you guys read much on the research on momentum? Wesley Gray sounds like he has been on the podcast circuit lately. He’s been on several of the quant/value guys I listen to. He has some convincing arguments that momentum and value performs much better than value alone. Seems to be consistent across long periods of time and multiple markets. It doesn’t sit well with me, but he also makes an interesting case on a possible economic explanation: that price trends impact fundamental factors, such as the cost of capital, ability to attract talent, and such.
i’m guessing there could be an identification issue. most funds that i see are identified as a “blended” fund that doesn’t explicitly identify as growth or value because the holdings can be characterized as both. also, don’t the majority of growth stocks either implode or become value stocks at one point? i could see how it’s easier to outperform as a growth manager if the difference is picking stocks that don’t implode and picking those that are good enough to eventually become value stocks. it is more difficult as a value manager as the positive binary scenario of maintaining your value label is not all that exciting and it is likely harder to differentiate between stocks on this basis.
at what point does momentum value stop being value?
how long are the holding periods?
watched the documentary last night.
buffett is def a prodigy. very socially awkward.
i do think he would make money today. he did admit he got lucky with berkshire so i dont think he would be a multi billionaire if he was born in the 60s or 70s but i still think he would be very wealthy.
liked the documentary a lot.
wow. didnt know there was a new hbo doc. imma watch it tonight when i work out. i’ve seen most of his docs and interviews. cool stuff af