September 08, 2020
By Baruch Lev, Professor of Accounting and Finance, Stern School of Business, NYU, and Anup Srivastava, Canada Research Chair, Haskayne School of Business, University of Calgary
Summary: Based on extensive data analysis we show that value investing has generally been unprofitable for almost 30 years, barring a brief resurrection following the dotcom bust. We identify two major reasons for the failure of value investing: (1) accounting deficiencies causing systematic misidentification of value, and particularly of glamour (growth) stocks, and (2) fundamental economic developments which slowed down significantly the reshuffling of value and glamour stocks (mean reversion) which drove the erstwhile gains from the value strategy.
Explaining the Recent Failure of Value Investing