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I’ve spent a lot of time researching this topic, and here’s what I found.
The value vs. growth debate is one of the oldest questions in investing. What picture emerges from 50 years of data? And what does the reversal of the past decade mean?
Ever noticed this pattern in your own life?
The Fama-French 3-Factor Model: Academic Foundation of the Value Premium
In a 1992 paper, Eugene Fama and Kenneth French showed that historically, value stocks (low P/B ratio) have outperformed growth stocks (high P/B ratio).[1] U.S. equity data from 1963–1990 showed an annual value premium of approximately 4–5%.
Two explanations exist for this “value premium”:
My take: the research points in a clear direction here.
References
Sources cited inline throughout this article.
Part of our The Three-Fund Portfolio: 30 Years of Data Show Why Simplicity Wins guide.
