Growth versus Value Stocks

Different stock market conditions typically call for an emphasis placed on growth or value stocks. Examining the the annual premium of growth and value stocks in accordance to the book-to-market ratio you will see interesting results from 1928-2000. Growth stocks have low book-to-market ratios while value have high ones. When the annual premium of value stocks is positive they will outperform growth and vice versa. Often during this period there will be time spans of 2 years to seven years. This does not mean you should transfer all your investments to one or the other when premiums are in their favor, but it does mean you can weight your portfolio to take advantage of this potential trend.

Written by mike on August 22nd, 2006 with no comments.
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