Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Loading...
Most Recent Stories

Is Value Investing Dead?

There’s been a lot of chatter in recent years about the underperformance of value vs growth. This has led some people to declare that value is dead. But is it? Tadas Viskanta recently asked this question of some influential financial thinkers (and also me). Here’s a link to their answers. And here’s what I said:

”I have never liked the idea of “value investing” as a data traceable “factor”. That is, we are all value investors in the sense that we are all looking to buy assets that we can sell at a higher price in the future. Whether you can use historical data to trace when something is undervalued or not is suspect in my view.

It seems like sometimes Wall Street finds these datasets, assigns causation where there is only correlation and wraps it into a neat narrative to sell for high fees. But to the question – NO! Value investing is definitely not dead.

But the idea that you can predict something that is currently undervalued using academic concepts like price to book or PE ratios might very well be dying because it was never alive to begin with.”

Make no mistake. I am very much a value investor in the sense that I always like to try to buy assets that will appreciate in value. In fact, the whole essence of Countercyclical Indexing is to try to be rebalancing your portfolio so that you’re buying low and selling high. It is very much a value based strategy. You could even say that it relies on a form of the value factor, however, with one important difference – I don’t believe that the asset allocation of our savings should target alpha, or market beating returns. That is, after all, the whole purpose of factor investing.

In my view, we should use factors so that they create returns that generate better behavior and thereby result in greater performance than a counterfactual portfolio. Factors, such as a price to book ratio, used in solitude, can actually increase behavioral risk rather than reduce it. And that is why some traditional value factors are falling out of favor.