This is a great article from Alpha Architect – short excerpt below

Value Investing: Can You Withstand The Pain? by Jack Vogel, Ph.D., Alpha Architect

So why isn’t everyone buying cheap stocks?

Being a value investor requires some patience and faith that market overreactions will eventually be corrected.

In theory, value investing is easy: buy and hold cheap stocks for the long haul.

In practice, value investing IS ALMOST IMPOSSIBLE.

Using Ken French’s data, we examined some time periods where it was painful to be a value investor.

One such period is during the run-up to the internet bubble. We examine the returns from 1/1/1994-12/31/1999 for a Value portfolio (High B/M quintile, VW returns), Growth portfolio (Low B/M quintile, VW returns), Risk-Free return (90-day T-Bills), and SP500 total return.

value investing
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Talk about a beat-down! Looking at the annual returns, value investing lost every year to a simple market allocation!

value investing
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Alpha Architect full article here