value vs growth

yes, both cfai and schweser are consistent on this. but my counter argument has been value names are cheap b/c value investors don’t think the market pays enough for companies’ earnings. take utilities, their eps’ are both sound and stable (literally no growth), but PE’s are generally low. last week, GE’s 6% earning decline seems to be ground breaking for a company like GE, but, according to bloomberg, earnings at companies in the S&P 500 are forecast to fall an average of 12.3 percent in the first quarter. i agree GE is both a value name and cyclical, but i have hard time to believe GE’s earnings are more volatile than names like apple or ebay (6% vs 12.3% and more in the other end of mean, you do the math).

rand0m, I agree with everything you said. But that’s not what CFAI/Schweser are saying. They’re saying Value PORTFOLIOs show more earnings variability than Growth PORTFOLIOS. A growth manager would sell a particular stock once growth prospects dwindle or earnings fall off. A value manager tends to hold on for longer. Still, I also question the validity of the conclusion – like you, I believe that the typical growth portfolio would still exhibit more variability vs a typical value portfolio, but I kind of get what they’re trying to say here.

TooOld can you point me where exactly CFAI/Schweser mentionds the fact that value portfolio shows more earning volatility then growth portfolio?

see my reference above…