Searching for Inner Peace with Value Factors

Risk & Reward, 2020, 4th issue, pp. 14-19

6 Pages Posted: 6 Feb 2021

Date Written: September 10, 2020

Abstract

Value factors have always been an essential part of quantitative investing processes. We show that the deterioration in performance of value stocks, as defined by high book-to-price (B/P) ratios, comes as no surprise given their relatively poor fundamentals as well as slower mean reversion of profitability. The opposite has been observed for low B/P “glamour” stocks. Value defined by high earnings yield (E/P) has also suffered from deteriorating performance despite being fundamentally different from value characterized by a high B/P.

Keywords: value investing, profitability, mean reversion, valuation, growth

JEL Classification: G11, G12, G14, M41

Suggested Citation

Shea, Yifei and Radatz, Erhard, Searching for Inner Peace with Value Factors (September 10, 2020). Risk & Reward, 2020, 4th issue, pp. 14-19, Available at SSRN: https://ssrn.com/abstract=3737895

Yifei Shea (Contact Author)

Invesco

100 Federal St
28th floor
Boston, MA MA 02110
United States

Erhard Radatz

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

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