The enduring appeal of style investing lies in its intuitive nature and ease of use. Even with the rise of more intricate factor strategies, the original Russell style methodology creates clear segmentation of the market along meaningful and powerful lines. Growth and value in particular created an almost Shakespearean dialogue, where subsequent generations of investors have debated, measured market risks, and allocated towards their investment objectives through the lens of these two contrasting, yet complementary, investment styles.
This paper is the first in a series of four to further this generational understanding of growth and value style methodologies, along with their practical implications. The intension is not only to explore how these frameworks can decompose market risks, but more importantly inform evidence-based investment outcomes. These papers examine four critical questions on the evolution of U.S. growth and value style market regimes, namely:
- How long do growth and value market cycles typically last?
- How impactful are oscillations between growth and value?
- How do style regimes transition? Are shifts slow or sudden?
- What factors motivate performance disparities between growth and value?
The recent shift to value lends a renewed credence to these cycles within the growth and value paradigm, especially following the unprecedented Great Growth Regime of the last decade plus. This analysis will focus on the initial question, introducing a methodology to compare different growth and value regimes so as to quantify their length and consistency. Here we leverage over four decades of Russell 1000 Growth and Value data to not only understand historical patterns and behaviors, but to better contextualize our current market positioning. Ultimately we find style regimes are not transitory phenomena measured in months, but durable trends measure on multi-year horizons.
To read part two of the paper, which addresses the magnitude of the impact these style trends have had historically - by examining the cycle longevity, click here.