Wes Crill, PhD
Senior Investment Director and Vice President
Global diversification can increase the reliability of outperformance for strategies pursuing higher than market returns because premiums, like the value premium, do not always move in lockstep across markets. Positive outcomes for a premium in one region can offset underperformance in another.
A global perspective on recent relative returns for value stocks emphasizes this point. While value underperformed growth in the US over the past 12 months,1 value outperformed sharply within both developed ex US and emerging markets. Going back five years, including a difficult stretch for the premiums leading into the pandemic, value beat growth in both non-US segments.
While we expect positive value premiums every day, realized returns are uncertain. A globally diversified approach to value may increase the odds of outperforming.
INDEX DESCRIPTIONS
Fama/French US Value Research Index: Provided by Fama/French from CRSP securities data. Includes the lower 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Fama/French US Growth Research Index: Provided by Fama/French from CRSP securities data. Includes the higher 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Fama/French International Value Index: January 1975–present: Fama/French International Value Index. Simulated strategy of international developed countries with securities in the lower 30% price-to-book range. Source: Ken French website. Simulated from MSCI and Bloomberg data.
Fama/French International Growth Index: January 1975–present: Fama/French International Growth Index. Simulated strategy of international developed countries with securities in the higher 30% price-to-book range. Source: Ken French website. Simulated from MSCI and Bloomberg data.
Fama/French Emerging Markets Value Index: July 1989–present: Fama/French Emerging Markets Value Index. Courtesy of Fama/French from Bloomberg and IFC securities data. Includes stocks in the upper 30% book-to-market range in each country; companies weighted by float-adjusted market cap; rebalanced annually in June. Fama/ French and multifactor data provided by Fama/French.
Fama/French Emerging Markets Growth Index: July 1989–present: Fama/French Emerging Markets Growth Index. Courtesy of Fama/French from Bloomberg and IFC securities data. Includes stocks in the bottom 30% book-to-market range in each country; companies weighted by float-adjusted market cap; rebalanced annually in June. Fama/ French and multifactor data provided by Fama/French.
Source: Kenneth R. French – Data Library (dartmouth.edu).
Results shown during periods prior to the index inception date do not represent actual returns of the index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.
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