Broker Check

We Don't Know What We Don't Know

| May 19, 2017
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This from a recent Morningstar article:

"Since the mid-1990s, value stocks have roughly matched growth stocks' returns..."  

Really?  I know we haven't seen value stocks beat growth over the last 10 years or so (largely due to their underperformance during the bear market of 2007/2008), but we've never seen a 20-year period in the US where value has failed to outperform growth.  So I looked up the data:

I have no doubt that someone can find an index of value stocks that has failed to produce the value premium since the mid-1990s.  The truth is, however, when we look at DFA's value "asset class" mutual funds which are designed and managed specifically to capture the value effect in stocks, we see predictable results -- about 2% to 4% per year higher returns over growth stocks in the US and non-US markets.  Yes, there's been a sizeable value premium in stocks since the 1990s.  Sometimes we just don't know what we don't know....

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