This is an apparently (?) mainstream econ paper arguing that "value investment" strategies make money because they are contrarian to "naive" strategies, i.e. "dumb money" http://lsvasset.com/pdf/research-papers/Contrarian-Investment-Extrapolation-and-Risk.pdf … .
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The authors define a "glamour" stock as one that has a high price relative to earnings, book value, or cash flow; a value stock is one that has a low price relative to earnings, book value, or cash flow. Value stocks do better than glamour stocks.
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How much better? 11% a year better. That's a LOT if you're doing long-term investing.
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oh yeah, the “value anomaly” (stocks that are obviously “cheap” relative to measures of fundamentals outperform stocks that are “expensive” over time) has a huge academic literature behind it...and also the anomaly seems to have totally vanished
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when did it vanish?
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It can be very difficult to differentiate between whether you're making money off some persistent fraction betting wrong, or just discovering a predictable time-varying risk premia/factor. Canonical paper: https://faculty.chicagobooth.edu/john.cochrane/research/papers/cochrane%20dog%20that%20did%20not%20bark.pdf …
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