Harnessing Empirical Finance in Long-Term Investing Strategies with Dimensional’s Savina Rizova
Excess Returns
How to Think About Drivers of Returns
In terms of implementing our value strategies for example is we start first on price to book in the smell or large cap or air cap portion of the market but then within that value defined universe we actually take into consideration profitability which is make up by excluding the least profitable names. This allows you to basically identify even um where effectively highly expected return stocks because what valuation clearly going back to basics tells us is the expected return of any investment depends on the price you pay and the expected future cash flows profitability of that company said in a 2019 paper called investment and expected stock returns. You found a very interesting thing in that paper in terms of a difference between how the investment factor works for smaller companies and for
