Value v. Growth: should portfolios have a style bias?

20 October 2022


Expert: Mamdouh Medhat, Dimensional Facilitator: Paul Kearney


  1. Over the period 1928 to 2022 the ‘Value Premium’ (the difference in the one-year return between value and growth indices) has been 4.22% on average
  2. Looking at historical valuations (June 1926 – January 2022) valuations on US growth stocks have continued to increase far surpassing the historical averages, while the US value stocks continue near their long-term average


How can one seek to realise the value premium?  Can you time the value premium?

Investment thesis:

  • Seek consistent, systematic exposure to deep value in diversified portfolios
  • Integrate multiple premiums across long and short term, and intra-day return drivers
  • Using daily re-balancing to maintain a consistent exposure allowing for flexible, cost-efficient trading

The make-up of market indices tracking value stocks hold some surprisingly large growth stocks in their constituent stocks – reference MSCI World Value Index.

Key takeaways:

  • Monitor outcome of investment thesis over the medium term to understand whether the strategy delivered the expected returns