QVAL: A Close Look At The Methodology
February 20, 2023
Summary
- Value investing is one of the oldest investment styles, and the original idea remains unchanged: cheap stocks tend to outperform expensive stocks on average.
- Despite weak performance from 2018 until recently, the underlying drivers of the value premium remain still valid and the factor enjoyed a comeback since late 2020.
- The Alpha Architect U.S. Quantitative Value ETF couldn’t detach itself from the difficult value-period and has massively underperformed the S&P 500 benchmark since its inception in October 2014.
- QVAL also had problems within the value world. The ETF underperformed two simple academic value benchmarks from Kenneth French’s website, and 7 other well-known value peers.
- Some of the underperformance could come from the fact that Alpha Architect does not consider more recent academic insights on value investing in some parts of their process.
- SA #18: RPV – ‘Pure Value’ Is Indeed More Value Than ‘Value’
- SA #17: IUSV – Transparent Value With Modest Active Risk
- SA #16: IWD – Low Growth Is Not Necessarily Value – Also For Large Caps
- SA #15: VLUE – Transparent Value With Little Industry Bets
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