Interest Rates and Growth Stocks

OpinioPro Selection
By September 26, 2022 08:38

Interest Rates and Growth Stocks

Earlier this month, Cliff Asness at AQR wrote a really interesting piece about interest rates and how they may not be as related to the valuation or performance of growth or value stocks as we all think. This piece followed a paper from his colleagues at AQR (Thom Maloney and Toby Moskowitz) in which they suggested that it is possible, if not likely, that falling interest rates have very little to do with rallies in growth stocks over the long term, or with the underperformance of value-oriented strategies. The paper basically suggested that, despite what we all want to see or believe, that the underperformance of value stocks is not motivated by a drop in interest rates. This one is very hard to believe in practice, especially given how salient and fresh this most recent experience has been for all of us. In their abstract, they address this point: “Despite eye-catching returns during a few episodes in recent years…the economic significance of any relationship (to bond yields or the slope of the yield curve) is small and not robust in other samples.”

OpinioPro Selection
By September 26, 2022 08:38

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