the way I think of this is that the price of any stock is related to the value of its expected future earnings. For value stocks, the bulk of that value is in the near term earnings. For growth, the value is in the long term earnings.
The reason that value stocks outperforms growth stocks in the long term is that people think the distress on value is worse than it is, and overestimate how good it will be for a growth stock.
The reason this is different for now, and in 1926-41, is that the growth stocks executed their business model. And value stocks didn’t revert back from distress.
the way I think of this is that the price of any stock is related to the value of its expected future earnings. For value stocks, the bulk of that value is in the near term earnings. For growth, the value is in the long term earnings.
The reason that value stocks outperforms growth stocks in the long term is that people think the distress on value is worse than it is, and overestimate how good it will be for a growth stock.
The reason this is different for now, and in 1926-41, is that the growth stocks executed their business model. And value stocks didn’t revert back from distress.
Hope this helps, Chris