Systematic value strategies have had one of the worst performing periods in their history in the past decade. This extended underperformance, coupled with changes in the market and economy that many argue are unfavorable for the strategy have led many to question whether it is permanently broken. As believers in the strategy, we have a natural tendency to discount these arguments and to invite on guests who support our opinion.
So in this episode, we wanted to counteract that bias and look at the other side of the coin. We are joined by Applied Finance founder Rafael Resendes, who has been a vocal critic of traditional approaches to value. We talk about why traditional value may not produce the kind of results many value investors are looking for going forward and examine the arguments against the strategy.
- The difference between value and cheapness – the importance of economic profit and the framework his firm uses to calculate intrinsic value;
- The case against the investment factor;
- The five factor model he built to address deficiencies in popular academic models and lots more
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