#MARKETS & INVESTING
A strategy that beats the market for 80 years, then gets beaten by it for 14 straight years: it's the same strategy.
Published on August 20, 2026
Following the work of Eugene Fama and Kenneth French, finance research tracks a factor called HML (“high minus low”): the performance of a portfolio that buys stocks priced low relative to their book value and sells those priced high. Using U.S. market data maintained by Kenneth French (CRSP database), this factor returned an average 5.9% more per year than the market between 1927 and 2006 — 80 years. Between 2007 and 2020, it returned an average −6.7% per year for 14 consecutive years, as expensive stocks, tech in particular, dominated. Then, between 2021 and 2025, the factor rebounded to an average +7.6% per year.
Does the 2021-2025 rebound mean the value premium is back for good?
Impossible to say for certain: brief rebounds had already occurred during the 14 lean years without lasting, and researchers themselves remain divided on whether the 2007-2020 drought reflects a structural market shift or simply an unfavorable stretch, however long.
In other words: a factor that paid off for 80 years can reverse for 14 straight years — plenty long enough to make a disciplined investor doubt the strategy, or even abandon it right before it turns back around.
Three caveats, because they matter
- These are statistical factor returns (long cheap stocks, short expensive ones), not those of an investable fund as such: fees, transaction costs and bid-ask spreads would reduce the return actually capturable.
- The 2007-2020 period coincides with an unusual concentration of the U.S. market around a small number of very large technology stocks, a rare phenomenon in market history.
- The calculation covers the U.S. market (CRSP data); the value premium followed different paths in other markets (Europe, Japan) over the same periods.
Why it still matters: judging an investment strategy over 5 or even 14 years isn't enough to know whether it has stopped working or is simply going through a bad stretch — the same uncertainty applies in reverse to a strategy that just performed well.
For you
- Would you abandon a strategy that has underperformed for several years, even if its long-term record is solid?
- Over what time span do you decide an investment strategy has “stopped working”?
Source: Kenneth R. French Data Library (Tuck School of Business, Dartmouth), annual HML factor, CRSP database, Ze Finance calculation on 1927-2025 returns.
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