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Equity Trading: The Trouble with Value

16 Pages Posted: 9 Dec 2015 Last revised: 17 Dec 2015

Jamil Baz

Man Group

Nicolas Le Roux

Pimco Europe

Date Written: December 16, 2015

Abstract

Recently, liquidity-driven economic policies have mounted a challenge to time-series value investing. In this paper, we examine the risk-return performance of simple value indicators.We find that: 1) even though long term equity returns are partially predictable, directional value investing delivers mediocre results; 2) the "Central Bank put" is a fly in the ointment for value investors; 3) relative value has broadly outperformed absolute value. Lastly, we conjecture that the poor performance of directional value investing hides substantial overvaluations in U.S. equities.

Keywords: Value, Equity, Valuation, Cross-Section, Time-Series, Fed Policy, Overvaluation, Dividend Yield, PE, Tobin's Q

Suggested Citation

Baz, Jamil and Le Roux, Nicolas, Equity Trading: The Trouble with Value (December 16, 2015). Available at SSRN: https://ssrn.com/abstract=2700691

Jamil Baz

Man Group ( email )

Sugar Quay
Lower Thames Street
London, EC3R 6DU
United Kingdom

Nicolas Le Roux (Contact Author)

Pimco Europe ( email )

11 baker street
Marylebone
London, W1u 3AH
United Kingdom

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