The Brandes Institute

Value vs. Glamour: A Global Phenomenon (September 2008)
In 1994, Josef Lakonishok, Andrei Shleifer, and Robert Vishny published a landmark study investigating the performance of value stocks relative to that of glamour securities in the United States over a 26-year period. Their research concluded that value stocks tended to outperform glamour stocks by wide margins. However, their study did not include the glamour-driven markets of the late 1990s and early 2000s. What effect might this period have on their conclusions? To find out, the Brandes Institute updated their Value vs. Glamour research, now through June 2008, to examine the comparative performance over a 40-year period. In addition, we also extended the scope of the initial study to include non-U.S. markets, seeking to determine if the value premium has been evident worldwide.

Global Small-Cap Stocks: Reexamined and Redefined (September 2008)
The small-cap premium has not been apparent consistently outside the United States since 1989. Why? In this comprehensive study, the Brandes Institute investigates existing methodologies for defining the global small-cap universe and their relationship to performance. We also introduce regional and country universes designed to analyze constituent-level fundamentals and their influence on historical performance differences.

Our research reveals that North American small caps have shown differentiating fundamental traits vs. their non-North American small-cap peers. But these differences in fundamentals may not fully explain the performance disparity. Perhaps the origins of a company and its point on its “lifecycle” are different across regions. The Institute intends to examine the performance characteristics of lifecycle groupings among small caps across regions and sectors.

Fixed Income Falling Knives Phase Two: Examining the Relationship Between Issuer-Specific Bond and Equity Returns (October 2007)
Previous research by the Brandes Institute documented the opportunities available by investing in falling knives (securities whose prices have fallen sharply). Now, in new research on this topic, we investigated the relationship between bond and equity prices in this context. Specifically, we looked for evidence of whether a company’s stock price before a fixed income falling knife event gave any indication of its subsequent bond prices, or vice versa.

Global Small Cap Stocks: Reexamined and Redefined (July 2007)
The small-cap premium has not been apparent consistently in developed markets outside North America since 1989. Why? In this comprehensive study, the Brandes Institute investigates existing methodologies for defining the global small-cap universe and their relationship to performance. We also introduce regional and country universes designed to analyze constituent-level fundamentals and their influence on historical performance differences.

Our research reveals that North American small caps have shown differentiating fundamental traits vs. their non-North American small-cap peers. But these differences in fundamentals may not fully explain the performance disparity. Perhaps the origins of a company and its point on its “lifecycle” are different across regions. The Brandes Institute intends to examine the performance characteristics of lifecycle groupings among small caps across regions and sectors.

Most Recent Articles:

Structured Products: Asset Backed Securities – Opportunities Resulting from Systematic Mispricing (September 2008)
Asset-backed securities have attracted attention in the recent months amid the uncertainty surrounding the mortgage sector and securitized debt. This paper examines the “boom/bust” cycle of subprime mortgage pools, and demonstrates how long standing perceptions of rating agencies and their ratings could potentially be either a risk or an opportunity.

Value Investing: Has It Worked In Emerging Markets (August 2008)
The Brandes Institute’s Value vs. Glamour research has demonstrated the persistent outperformance of value stocks over glamour stocks in developed markets worldwide over long time periods. Investors may wonder if the value premium is also evident in developing countries. In this article, we investigate whether “glamorous” companies in developing countries have outperformed their “value” counterparts over the last few years. We also reveal whether value investing has worked in emerging markets over the long term.

Value vs. Glamour: Bond Performance (July 2008)
Previous research by the Brandes Institute has shown the historical long-term performance advantage of value stocks over glamour stocks. What about corporate bonds? Here, we show that bonds issued by value companies have provided greater appreciation than those issued by glamour companies.

The Investor’s Paradox: Making Intelligent Decisions Amid More Choices (June 2008)
Having more choices is always a benefit – or is it? In the book The Paradox of Choice (New York: HarperCollins, 2004), Professor Barry Schwartz convincingly argues that the process of making constant decisions amidst a sea of overwhelming choice – be it health care options, televisions, or investment products – can and often does result in behavioral biases, stress, and poor decisions. In this article, we share insights from The Paradox of Choice and discuss the implications for investors.