O’Shaughnessy Asset Management explores the long history and empirical foundation of value investing, arguing that price remains one of the strongest predictors of future returns. The paper shows that cheap stocks have outperformed for over 50 years, yet investors repeatedly abandon the strategy after periods of underperformance, raising questions about behavioral discipline.
The Factor Archives: Value
O’Shaughnessy Asset Management
Jamie Catherwood
Research
10 Pages
Key Takeaways
Value Premium Persistence: Cheapest decile stocks delivered 4.4% annual excess returns over 55 years and outperformed in 79% of rolling 3-year periods.
Behavioral Mispricing Cycles: Over 672 rolling periods, value strategies consistently beat expensive stocks despite repeated investor capitulation during drawdowns.
Composite Factor Advantage: Multi-metric value approaches outperform single-factor screens, improving Sharpe ratios versus standalone metrics like P/E across long-term datasets.
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