Global Research Syndicate
No Result
View All Result
  • Latest News
  • Consumer Research
  • Survey Research
  • Marketing Research
  • Industry Research
  • Data Collection
  • More
    • Data Analysis
    • Market Insights
  • Latest News
  • Consumer Research
  • Survey Research
  • Marketing Research
  • Industry Research
  • Data Collection
  • More
    • Data Analysis
    • Market Insights
No Result
View All Result
globalresearchsyndicate
No Result
View All Result
Home Data Analysis

Value Is Cheap Now – SPDR Portfolio S&P 500 Value ETF (NYSEARCA:SPYV)

globalresearchsyndicate by globalresearchsyndicate
November 16, 2019
in Data Analysis
0
Value Is Cheap Now – SPDR Portfolio S&P 500 Value ETF (NYSEARCA:SPYV)
0
SHARES
12
VIEWS
Share on FacebookShare on Twitter

This piece is inspired by research that Cliff Asness started years ago and continued since then. The methodology and calculations are original to the article.

A lot of value-oriented strategies have lagged the market for years. It is reflected in value ETFs. The SPDR Portfolio S&P 500 Value ETF (SPYV) shows a total return of about 253% since 1/1/2009 (12.30% annualized) vs. about 326% for SPY (14.26% annualized). The next chart shows the evolution of an investment of $100 in both products starting in January 2009.

Some analysts say “Value” as an investing style has been lagging for more than a decade. Personally, I think Value has underperformed the broad market since 2014, and the next chart shows why. The blue line plots the equity value of a market-neutral long-short portfolio containing half of all S&P 500 stocks in equal weight for almost 21 years, rebalanced every four weeks. The long side has the 125 cheapest stocks, the short side contains the 125 most expensive stocks.

To rank stocks on value, I have ranked them separately on 4 ratios: price/earnings, price/book, price/sales and price/free cash flow. Then I have listed stocks with the 125 best and 125 worst rank sums. As two or more stocks may get the same rank sum, I have done a final ranking on the price/book ratio to select the 125 cheapest and 125 most expensive stocks. Ranks are recalculated every four weeks, resulting in a hypothetical portfolio giving the equity curve above. This is neither a backtest nor a recommended strategy. It is a study for educational purposes. The highest equity value was reached in October 2013, which justifies my claim that Value has worked backward since 2014. The orange line is the linear regression of the equity curve. To put it simple, it plots the average outperformance of Value on 21 years.

The next chart plots the difference between the previous equity curve and its regression line.

It makes the series looks stationary, at least on these 21 years. In reality, it has no reason to be stationary: the excess return of Value (and the equation of the regression line) would be different on a longer interval. However, this chart gives a pretty good idea of Value cycles in the last two decades. We can consider it an indicator about the “Value of Value”.

According to this chart, Value looks cheaper now than after the 2008 meltdown. It is cheaper relatively to the most expensive part of the market, but the market as a whole is obviously much more expensive.

This chart is likely to revert to the mean at some point. Mean reversion could give quantitative targets and probabilities if the mean and the standard deviation were constants. Once again, they have no reason to be so. The randomness of markets has little to do with the structured randomness of a casino game or quantum physics. Here, mean reversion is more a pseudo-science, common-sense idea that can’t help make a quantified, timely prediction. Anyway, from a long-term perspective, value stocks show a strong anomaly with a positive expected excess return. Large cap value stocks as a group have not looked so cheap relative to expensive stocks for almost 20 years.

Most of my stock holdings are based on quantitative value models. However, value is a bad timing indicator. Quantitative Risk & Value (QRV) provides you with a more realistic quantitative approach, for a world of probabilities instead of just risk on/risk off. It includes a systemic risk indicator and strategies based on it. Get started with a two-week free trial and see how QRV can improve your investing decisions.

Disclosure: I am/we are long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Related Posts

How Machine Learning has impacted Consumer Behaviour and Analysis
Consumer Research

How Machine Learning has impacted Consumer Behaviour and Analysis

July 12, 2023
Market Research The Ultimate Weapon for Business Success
Consumer Research

Market Research: The Ultimate Weapon for Business Success

June 29, 2023
Unveiling the Hidden Power of Market Research A Game Changer
Consumer Research

Unveiling the Hidden Power of Market Research: A Game Changer

June 29, 2023
7 Secrets of Market Research Gurus That Will Blow Your Mind
Consumer Research

7 Secrets of Market Research Gurus That Will Blow Your Mind

June 29, 2023
The Shocking Truth About Market Research Revealed!
Consumer Research

The Shocking Truth About Market Research: Revealed!

June 29, 2023
market research, primary research, secondary research, market research trends, market research news,
Consumer Research

Quantitative vs. Qualitative Research. How to choose the Right Research Method for Your Business Needs

June 29, 2023
Next Post
Instagram statement) Shady app lets stalkers view private Instagram accounts in exchange for their own data

Instagram statement) Shady app lets stalkers view private Instagram accounts in exchange for their own data

Categories

  • Consumer Research
  • Data Analysis
  • Data Collection
  • Industry Research
  • Latest News
  • Market Insights
  • Marketing Research
  • Survey Research
  • Uncategorized

Recent Posts

  • How Machine Learning has impacted Consumer Behaviour and Analysis
  • Market Research: The Ultimate Weapon for Business Success
  • Unveiling the Hidden Power of Market Research: A Game Changer
  • Privacy Policy
  • Terms of Use
  • Antispam
  • DMCA

Copyright © 2023 Globalresearchsyndicate.com

No Result
View All Result
  • Latest News
  • Consumer Research
  • Survey Research
  • Marketing Research
  • Industry Research
  • Data Collection
  • More
    • Data Analysis
    • Market Insights

Copyright © 2023 Globalresearchsyndicate.com

Login to your account below

Forgotten Password?

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT