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01 February, 2016

A Vanishing Value Premium?

A core tenet of Dimensional Fund Advisors is that investment returns include some persistent additional returns which come from having a particular 'tilt' towards or away from certain types of security. One of these 'Dimensions of Expected Returns' is that DFA believe that value stocks will over sufficient time provide a greater return per unit of risk than growth stocks; that is to say equities which pay a higher dividend will produce more for the investor over the long term than equities that pay a lesser dividend.  This bias in favour of value over growth sometimes works, and sometimes doesn't - and indeed can be reversed for significant periods of time.  Here Weston Wellington, Vice President at Dimensional Fund Advisors analyses thes trends and offers some wise words about the persistence of this characteristic

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by John Stirling