New research reveals why value investing may be losing its edge
The value premium has decreased over time because book equity is no longer a good measure of a company's true value. By looking at the fundamental-to-market ratio, which compares the present value of cash flows to market value, researchers found that this ratio better captures the value premium than traditional measures. This decline in the value premium is due to changes in how we measure a company's fundamental equity, not because value investing is less effective.