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