Rebalancing and the Value Effect

摘要

It is amply documented that a value portfolio outperforms a growth portfolio over long spans in most markets worldwide; less well known, however, is how this outperfor-mance is achieved. Decomposing the total returns of these strategies, Chaves and Arnott find that 1) value portfolios enjoy higher dividend income and 2) the average growth stock enjoys faster dividend growth than the average value stock, but surprisingly 3) value portfolios experience higher growth in dividends than growth portfolios. The authors argue that the first two findings are expected, but the third is not completely understood by investors.The third finding is a consequence of the nature of the rebalance rules for growth and value portfolios. Each rebalance replaces lower-yielding value stocks with new higher-yielding value stocks and replaces higher-yielding growth stocks with new lower-yielding growth stocks. It is, therefore, the act of rebalancing and reconstituting the growth and value portfolios that increases the growth rate for dividend income in value strategies and rather sharply reduces it in the case of growth strategies. Although this finding is analogous to that of Fama and French, which is reported in their 2007 "Migration" paper, Chaves and Arnott more specifically attribute much of the advantage of value strategies to the acts of reconstituting and rebalancing and their side effects on dividends. In so doing, they shed some light on the faster dividend growth of value portfolios.