March 16, 2004

We believe style cycles over the past twenty-five years reflect changes in the economic environment. Our analysis suggests that during the bulk of the 1970's and part of the 1980's the environment favored value stocks over growth stocks. Therefore, it is not surprising to see that most of the empirical literature found that value stocks outperform growth stocks over the sample period. However, if we are right, the results reported in the literature suffer from sample selection bias. The value stocks did well because of the economic policies adopted during that time period. There is no guarantee that in the future the overall economic environment will favor value stocks at all times. Our analysis suggests that it behooves investors to pay attention to the economic environment and that growth stocks, when the environment warrants it, can have an important impact on the total return of a style based asset allocation strategy.

You must have an active account to view these reports. You may register for a trial here

Download Complete Report in PDF Format

Download Complete Report in Word Format