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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I don't read very much about finance but sociologically it was a surprise to me that there are professional scholars (as opposed to stock traders) who think you can reliably make money off of a persistent fraction of the market that bets wrong.
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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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Replying to @s_r_constantin
The "value effect" is pretty well-accepted in academic circles; some have tried to explain as a rational discount on value stocks, but that the effect exists is the modal view. (This strategy is also closing out one of its worst decades in history - is it still 11% per year?)
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