Choosing between value and growth in mutual fund investing
DOI:
https://doi.org/10.61190/fsr.v23i4.3206Keywords:
Value premium, Mutual fund alphas, Growth funds, Value funds, Mutual fund performanceAbstract
This article informs investors on the choice between value and growth mutual funds. The well- established value premium demonstrates that, on average, value securities outperform growth secu- rities, suggesting that an investor may be wise to choose value funds. Extant studies, however, suggest that growth funds outperform value funds. We show that value funds indeed outperform growth funds especially in terms of lower realized risk and higher realized terminal wealth, leading us to recom- mend value funds over growth funds. We argue that previous findings result from a bias against value in some multifactor models.
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