The prospects for value versus growth investing in 2016

Value currently underperforming

According to some measures, value is underperforming as an investment style relative to growth.

For example, the S&P Developed Broad Market Value index underperformed its growth counterpart by 1.1% per annum over the last ten years. This contrasts with the academic evidence that, in the long run, value outperforms growth. Indeed, the S&P Broad Market indices show value outperformed growth by around 1% per annum over the last 20 years. Part of the reason why value is currently underperforming growth is because value stocks in general have moved to more discounted valuation levels, thus dragging down the returns of value stocks compared to growth. Where is the earnings growth a...