Is Value Just an Interest Rate Bet?

AQR

Research

7 Pages

AQR argues the popular idea that value is simply an interest rate trade is mostly wrong. They walk through why the long run link between value returns and rate moves is weak and inconsistent, even if the last few years made it look obvious. The more provocative point is that the recent correlation may say more about bubble like growth expectations than about rates.

Date published: August 11, 2022

Key Takeaways

Rate link weak: Long run value performance is only loosely connected to changes in interest rates.
Duration story overstated: Typical value and growth portfolios have similar cash flow timing, limiting rate sensitivity.
Recent correlation misleading: Short windows can look convincing, but may reflect noise or stretched growth beliefs.

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