outperform

When we say 1 stock or group of stocks outperforms an other, what parameter of the outperforming stock will be better? It’s market price?

As in: during economic expansion credit risk premiums tighten, hence lower rated corporate bonds outperform higher rated corporate bonds.

Correct. Its market value (price) due to higher overall liquidity on market and/or increase in demand and/or risk premiums decrease whatever you find easier to interpret.

OK, thanks.

With all due respect, when we say that one asset outperforms another, we generally mean that the former’s _ return _ is higher than the latter’s, not its price.

But does not return in this case mean return from capital appreciation if I buy and sell the stock?

I’m referring to the sector rotation strategies and the implications of business cycle for different investing styles from Portfolio Management.

I’m gonna try and explain better what I don’t understand:

The curriculum describes that during recessionary times best strategy is to invest in value vs growth, small-cap vs large-cap or cyclical vs counter-cyclical, because in the aftermath of a recession value/small/cyclical will outperform growth/large/counter-cyclical.

OK what exactly will happen in the aftermath of a recession?

No.

It means total return.

Dividends matter, too.

Value stocks will have higher total returns than growth stocks, on average.

Small cap stocks will have higher total returns than large cap stocks, on average.

Cyclical stocks will have higher total returns than counter-cyclical stocks, on average.

Dear Magician,

Can you please explain what is the risk relationship between those two? I perceive growth stocks riskier than value stocks, which would imply that growth stocks had higher total returns than value stocks, on average. However, this statement says contrary. It’s a pity the curriculum does not cover this properly (I mean investment analysis accompanied with risk analysis).

I wasn’t asserting the fact; I was rephrasing the statement that Moosey had quoted.

I don’t know whether it’s true or not. I’d have to think about it.

Based on my understanding the overperformance of value/small/cyclical happens when the economy is coming out of recession, therefore in recessionary times you should invest into these types of stocks.

I assumed that when coming out of the recession the market prices of these assets suddenly increases at a higher rate than those of growth/large/non-cyclical. Maybe because these on the other hand never plunged that much?

Certainly I have forgotten dividend out of my definition when I was talking about return, as Magician corrected me, but my line of thinking was that when we speak about outperformance we practically think of the market prices of the stocks.

The curriculum does not make a great job in this section, although this would be avery interesting topic.