The significant underperformance of value strategies over the past 15 years has led many investors to ask: “Is Value Investing Dead?”
As we’ve previously argued, value investing isn’t dead, but one of the most popular value metrics – price to book (P/B) – is flawed and outdated. Changes in accounting rules, off-balance sheet liabilities, and the increased importance of intangible assets make P/B a poor measure of value.
The underperformance of major value index funds – such as the Russell 1000 Value ETF (IWD) – can be tied to their reliance on P/B and other unscrubbed traditional valuation metrics.
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