Comparative Performance of Value and Growth Stock Indexes

Abstract

The authors demonstrate that a growth stock index generated higher returns than a value stock index when the overall stock market performed well. Alternately, the value stock index generated higher returns than the growth stock index when the overall stock market performed poorly. This article provides compelling evidence that the value premium is inversely related to the performance of the overall stock market. The authors believe that this simple relationship will help investors better understand the comparative performance of the two investment styles.

TOPICS: Style investing, exchange-traded funds and applications, long-term/retirement investing