Pursuing a Successful Investment Experience

STEP 4: CONSIDER THE DRIVERS OF RETURNS


Academic research has identified these three equity dimensions which point to differences in expected returns. These dimensions are pervasive, persistent, and robust and can be pursued in cost-effective portfolios.


Diversification does not eliminate the risk of market loss. Relative price as measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. Profitability is a measure of current profitability, based on information from individual companies’ income statements.