FYI: The 2018 Credit Suisse Global Investment Returns Yearbook was published this week. Produced annually by academics Elroy Dimson, Paul Marsh, and Mike Staunton, who take a long-term lens to investing -- normally anathema to investment bank research publications -- the report is a cornucopia for serious fundamental investors.
This year's report devotes a chapter to "factor investing," a fashionable development in the fund management industry. Factor investing seeks out stocks that share a specific characteristic, or "factor," such as value, momentum, or low volatility. The objective is to outperform the broad market, so factor investing funds are sometimes referred to as "smart beta" or "enhanced beta" products (beta is a term from academic finance that refers to the market return).
"Value" -- stocks with a low price-to-earnings or price-to-book multiple -- has been a winning strategy over the long term, with low price-to-book multiple stocks returning 13% on an annualized basis, between 1926 and 2017 -- a 3.5 percentage point advantage over the broad market. However, as Dimson, Staunton, and Marsh point out, the last few years have not been kind to value, which has lagged the market (not to mention growth stocks) by a wide margin:
Regards,
Ted
https://www.credit-suisse.com/media/assets/corporate/docs/about-us/media/media-release/2018/02/giry-summary-2018.pdf
