Jun 19, 2023

 

Value stocks have gone through periods of both extreme over- and underperformance in recent years- a reminder that even reliable premiums can be volatile over shorter periods.

  • The two-and-a-half-year period ending December 2022 was one of the best for the value premium in Australian stock market history: Value stocks beat growth stocks by an annualised 16.5%.

  • The preceding three-year period, however, was historically bad for value stocks: Value underperformed growth by an annualised 16.0%.

  • Investors deterred by the rough three-year stretch may have missed out on the sudden, strong return of the value premium.

Recent Value Performance in Context

Value stocks have outperformed growth stocks in the long run, though the road can be bumpy. Disciplined investors may be rewarded for staying the course.

 

 

Important information and disclaimer

Performance data shown represents past performance and is no guarantee of future results
Value and growth stocks represented by the Fama/French Australia Value Research Index and the Fama/French Australia Growth Research Index, respectively.
Fama/French Australian Value Index (AUD): Simulated strategy of Australian securities in the lowest 30% price-to-book range. Source: Ken French website. Simulated from MSCI and Bloomberg data
Fama/French Australian Growth Index (AUD): Simulated strategy of Australian securities in the highest 30% price-to-book range. Source: Ken French website. Simulated from MSCI and Bloomberg data.
The Fama/French indices represent academic concepts that may be used in portfolio construction and are not available for direct investment or for use as a benchmark. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment.
Results shown during periods prior to each index’s inception date do not represent actual returns of the respective index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.
Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP.
 
This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and the target market determination (TMD) that has been made for each financial product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.