Expert: Mamdouh Medhat, Dimensional Facilitator: Paul Kearney
Headlines:
- Over the period 1928 to 2022 the ‘Value Premium’ (the difference in the one-year return between value and growth indices) has been 4.22% on average
- Looking at historical valuations (June 1926 – January 2022) valuations on US growth stocks have continued to increase far surpassing the historical averages, while the US value stocks continue near their long-term average
Context:
How can one seek to realise the value premium? Can you time the value premium?
Investment thesis:
- Seek consistent, systematic exposure to deep value in diversified portfolios
- Integrate multiple premiums across long and short term, and intra-day return drivers
- Using daily re-balancing to maintain a consistent exposure allowing for flexible, cost-efficient trading
The make-up of market indices tracking value stocks hold some surprisingly large growth stocks in their constituent stocks – reference MSCI World Value Index.
Key takeaways:
- Monitor outcome of investment thesis over the medium term to understand whether the strategy delivered the expected returns
