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Growth ETFs: Performance & Factor Exposures

Neither performance nor factor exposures are desirable.

Nicolas Rabener
10 min read
6 Feb 2023

SUMMARY

  • Growth ETFs are not very differentiated, despite growth having various interpretations
  • 34 out of 40 growth ETFs underperformed the stock market over the last 3 years
  • Nor was the long-term performance attractive

INTRODUCTION

Factors like value or momentum are also called stock market anomalies as there should not be any repeatable investing process that allows investors to harvest excess returns given efficient markets. Yet, factor investing is backed by decades of theoretical and practical research.

However, there are only a handful of factors vindicated by research and growth is not one of them. In fact, most academics view growth stocks as expensive stocks, so such a factor should be associated with negative excess returns (read

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