March 25, 2003

At the beginning of the first quarter the estimated probability of growth stocks outperforming value stocks was 56%. Thus, we began the quarter overweighed in growth stocks. The relative performance of the value and growth components of the large, mid and small-cap indices was as expected. For example, during the quarter the small-cap growth stocks have declined 3.23%, outperforming the small-cap value stocks by 258 basis points. The story at the mid-cap level is a similar one. The growth stocks have declined 3.48%, beating the value stocks by 415 basis points. The differential is even bigger for the large-cap stocks. The large-cap growth stocks produced a positive return of 0.66% beating its value counterpart by 490 basis points. The growth effect was larger for the larger cap stocks. This is one quarter when style and size worked in the same direction.

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