The Ideal Blend of Growth and Value

Posted: 1 Apr 2009

See all articles by Andrea S. Au

Andrea S. Au

State Street Corporation

Tony Foley

D. E. Shaw Investment Management LLC

Date Written: November 30, 2006

Abstract

As style-based investment strategies flourish, many investment professionals advocate diversified style-based portfolios, holding both growth and value funds, to reduce style risk. In practice, however, it is not clear that style-based diversification, as compared to a core approach, increases return and decreases risk. Our analysis of US data suggests that a style-neutral core portfolio will likely generate higher long-term risk-adjusted performance than a comparable style-based one. Although this is not true internationally, the relatively new and changing style environment coupled with the core fund growth tilt leads us to believe that these historical results may not be indicative of future results.

Keywords: Mutual Fund, Style, Value, Growth

JEL Classification: G20

Suggested Citation

Au, Andrea S. and Foley, Tony, The Ideal Blend of Growth and Value (November 30, 2006). Journal of Investing, Vol. 15, No. 4, 2006, Available at SSRN: https://ssrn.com/abstract=1371245

Andrea S. Au (Contact Author)

State Street Corporation ( email )

State Street Financial Center
1 Lincoln Street
Boston, MA 02111
United States

Tony Foley

D. E. Shaw Investment Management LLC

120 West 45th Street
Tower 45 39th Floor
New York, NY 10036
United States

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