Definition
The value factor targets stocks trading at low prices relative to fundamentals (low P/E, P/B, P/CF). Value investing has historically outperformed growth over long periods, though it underperformed significantly 2010-2020. The value premium is attributed to risk compensation or behavioral mispricing.
Example
A value factor ETF overweights stocks in the lowest P/B quintile of the market, systematically tilting toward cheaper stocks.
FAQ
What is Value Factor?
A factor strategy investing in stocks that appear undervalued by fundamental metrics.
Why is Value Factor important?
Value Factor helps investors evaluate investment strategies and make more informed decisions.