RT Journal Article
SR Electronic
T1 Value versus Glamour Stocks: The Return of Irrational Exuberance?
JF The Journal of Investing
FD Institutional Investor Journals
SP 75
OP 93
DO 10.3905/joi.2021.1.199
VO 31
IS 2
A1 Bellone, Benoit
A1 de Carvalho, Raul Leote
YR 2022
UL http://joi.pm-research.com/content/31/2/75.abstract
AB Value stocks have endured a period of severe underperformance until recently. This article shows that the value spreads between valuations of value stocks and their most expensive peers expanded in all regions and sectors during this period of underperformance, reaching the same extreme high levels last seen at the peak of the tech bubble in 2000. Investors have rerated expensive stocks relative to their value peers, thus reflecting an expanding difference in their respective earnings growth forecasts. There are signs this trend may now have changed. Value spreads may have started a new period of compression at the end of 2020, led by shrinking differences in earnings growth forecasts. A compression in value spreads would be favorable for value stocks, small-capitalization stocks, and multifactor strategies.