Value Versus Growth

Over time, value stocks have outperformed growth stocks and have done so with a lower standard deviation (see first table below). The coefficient of variation in the third column is the normalized measure of dispersion of a probability distribution. To calculate it, divide the risk by the return. The coefficient of variation provides a useful method for comparing each style by size (a lower number is preferred).

Growth and Value Returns and Risk: 1969-2008

Category Geometric Standard Coefficient

Mean Deviation of Variation

(Return) (Risk)

Large-Cap Growth 7.8% 20.5% 2.63

Large-Cap Value 9.2% 18.1% 1.97

Mid-Cap Growth 8.1% 22.1% 2.73

Mid-Cap Value 11.9% 20.4% 1.71

Small-Cap Growth 7.5% 25.0% 3.33