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Is the Small Value Premium Over?
Posted: Thu Mar 02, 2017 5:45 pm
by slowtraveler
I look at Small Value and the PE is 24.7 compared to Total Stock Market of 24.1, earnings growth rate is lower, return on equity is lower, 30% is in Financials and 20% is in Industrials. Doesn't look very attractive.
Am I missing something?
Re: Is the Small Value Premium Over?
Posted: Thu Mar 02, 2017 5:57 pm
by Lucky C
Research Affiliates (Rob Arnott, Chris Brightman, and some other smart people) predict that small cap will underperform at current valuations. However they also predict that value strategies will overperform. But which is a bigger factor for Small Value alpha, "Small" or "Value"?
Re: Is the Small Value Premium Over?
Posted: Fri Mar 03, 2017 4:53 pm
by ThisDinosaur
https://www.researchaffiliates.com/en_u ... r_zoo.html
Size premium was never statistically significant. Especially when looking outside the US. Value, on the other hand seems more fundamental.
Re: Is the Small Value Premium Over?
Posted: Fri Mar 03, 2017 5:33 pm
by IlliniDave
Factor premiums have really never been consistent in that they will sometimes underperform and sometimes overperform, and that it can take a lot of time for the premium to win out. What the track record might be if you look back 10, 20, 30 years from now, who knows? My guess is that in the long haul it will persist. I wouldn't speculate on SV seeking a short-term profit though.
Re: Is the Small Value Premium Over?
Posted: Sat Mar 04, 2017 2:26 am
by FBeyer
ThisDinosaur wrote:... Value, on the other hand seems more fundamental.
I see what you did there. I like it