Glossary
Value (factor)
Favouring cheap stocks (low price relative to book value, earnings, etc.). A classic factor; in our after-cost, after-tax tests it did not beat a broad index.
In plain terms
Value's premise is that markets over-punish boring or troubled companies, so buying cheap and waiting earns a premium. The risk is the 'value trap' — a stock that is cheap because the business is genuinely dying, and stays cheap.
Value also endures decade-long winters (roughly 2007-2020 most recently), which makes it psychologically brutal to hold. In our panel its after-cost edge over the cap-weighted index was not distinguishable from zero.
Related terms
Educational definitions only. Not investment advice.