Value Investing Dead?

Why has value investing (long undervalued stocks and short overvalued stocks) performed poorly since 2007? Is it dead, or will it recover? In their August 2019 paper entitled “Explaining the Demise of Value Investing”, Baruch Lev and Anup Srivastava examine the performance of the Fama-French value (HML) factor portfolio, long stocks with high book value-to-market capitalization ratios and short those with low ratios, because it is the most widely used value strategy. They then investigate reasons for its faltering performance. Using value factor returns and accounting data for a broad sample of U.S. stocks during January 1970 through December 2018, they conclude that: (more…)