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The Journal of Portfolio Management

The Journal of Portfolio Management

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Primary Article

Style Timing

Value versus Growth

Clifford S. Asness, Jacques A. Friedman, Robert J. Krail and John M. Liew
The Journal of Portfolio Management Spring 2000, 26 (3) 50-60; DOI: https://doi.org/10.3905/jpm.2000.319724
Clifford S. Asness
The managing principal at AQR Capital Management in New York.
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Jacques A. Friedman
A vice president at AQR Capital Management.
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Robert J. Krail
A principal at AQR Capital Management.
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John M. Liew
A principal at AQR Capital Management.
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Abstract

Both academic and industry research supports the long–term efficacy of value strategies are far from riskless, however. They can have long periods of poor performance. In an effort to improve upon these strategies, the authors have tried to forecast these returns with mixed results. Most of these “style timing” models re based on macroeconomic factors. The authors take a different approach considering two simple factors: 1) the spread in valuation multiples between a value portfolio and a growth portfolio (the value spread), and 2) the spread in expected earnings growth between a growth portfolio and a value portfolio (the earnings growth spread). They find that the greater the value spread and the smaller the earnings growth spread, the better their forecast for value versus growth going forward. These results are statistically and economically strong.

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The Journal of Portfolio Management
Vol. 26, Issue 3
Spring 2000
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Style Timing
Clifford S. Asness, Jacques A. Friedman, Robert J. Krail, John M. Liew
The Journal of Portfolio Management Apr 2000, 26 (3) 50-60; DOI: 10.3905/jpm.2000.319724

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Style Timing
Clifford S. Asness, Jacques A. Friedman, Robert J. Krail, John M. Liew
The Journal of Portfolio Management Apr 2000, 26 (3) 50-60; DOI: 10.3905/jpm.2000.319724
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