No. of Recommendations: 1
For ten years growth has outperformed value. Does the value premium not work anymore? I think it may not work as well. The reason is things work well, when no one knows about them. In 1992, French, and Fama discovered the French Fama 3 factor model. This means that you achieve the best performance by following 3 factors.

1. Stocks outperform bonds
2. Value outperforms
3. Small cap outperforms

Once this was known, people started buying more small value stocks, and the advantage was arbitraged away.

However, I think it will still work. For one thing, the growth of growth stocks tapers off. When that happens the high p/e stocks get slammed. Value stocks, realize they are doing something wrong, and make changes, and their earnings increase, and catch up to the market, and their prices go up faster than the market.

However, I think the main reason value will still work is because it stops working for long periods of time, and people give up on it. If it always worked, it would be arbitraged away.
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