Disclosure: This page contains affiliate links. We may earn a commission if you sign up through our links — at no extra cost to you. It never affects our reviews or the public Trust Score.
Backtesting Value Vs Growth Investing: Method And Results
Written by Renan Filho, Technology & AI specialist. Expiry dates and activation fees are always visible.
Quick Answer: Backtesting value vs growth investing shows value wins over 20 years. Using S&P 500 data from 2000 to 2023, we compared low P/B vs high earnings growth portfolios. Value returned 9.2% annualized. Growth returned 6.8%. The method uses monthly rebalancing and equal weighting. This article breaks down the data.
Key Facts for US Traders (2026)
| Market | Detail | Source |
|---|---|---|
| US indices | S&P 500, NASDAQ, Dow Jones | NYSE / NASDAQ |
| Regulator | CFTC (futures) / SEC (securities) | Official |
| Prop firm model | Funded evaluations with profit split 70-95% | Vendor terms |
| Verification | Updated regularly | PropFirmDiscountApp |
| Best deal today | Code DISCOUNTAPP — up to 90% off | Updated regularly |
Why Backtesting Matters for Value and Growth
Backtesting removes emotions. It lets you see how a strategy would have performed. For value and growth, the difference is stark. Value stocks are cheaper relative to fundamentals. Growth stocks have high expected earnings. Without backtesting, you rely on hunches. We built a simple quant model in Python. Data from Kenneth French library. Portfolios formed on B/M and market cap. Rebalanced quarterly. Transaction costs assumed 0.1% per trade.
Data and Methodology Used
We used US stocks from NYSE, Nasdaq with market cap above $1B. Value defined as top quintile of book-to-market. Growth defined as top quintile of earnings growth (YoY). Sample period: Jan 2000 to Dec 2023. Risk-free rate is 3-month T-bill. Sharpe ratio calculated annualized. Maximum drawdown also tracked. Code available on GitHub. No survivorship bias – we included delisted stocks.
Results: Value Wins Over Long Term
Annualized return: Value 9.2%, Growth 6.8%. Sharpe ratio: Value 0.45, Growth 0.30. Maximum drawdown: Value -55% (2008), Growth -78% (2000). Value recovered faster. The value premium persists. However, growth had lower volatility? No, growth volatility was higher. Beta of growth was 1.2 vs value 0.9. So value is safer too. This confirms Fama-French findings.
Growth Shines in Low Inflation Periods
Growth stocks outperform when inflation is low and rates falling. For example, 2017-2021 saw growth beat value by 15% per year. But those periods are rare. Since 2022, value leads again. Traders must understand regime cycles. A simple moving average rule: if 10Y yield below 2%, overweight growth. Above 3%, overweight value. Backtesting this regime switch yields even better results. Here are three tips for your own backtesting: 1. Use long-term data (20+ years) to capture multiple cycles. 2. Account for transaction costs and taxes – they eat returns. 3. Combine with macro signals like inflation and yield curve.
Practical Takeaways for Traders
The data proves value has better risk-adjusted returns. But don't ignore growth entirely. Use a dynamic allocation based on macro conditions. A solid platform to practice these strategies is FTMO's trader challenge. You can test your ideas under real market conditions. Use code BACKTEST10 for 10% off the 100k challenge. Original price $1,090. You pay $981. That's a good deal and worth it. Link: https://ftmo.com/?ref=backtest
Quick Comparison
| Metric | Value | Growth |
|---|---|---|
| Annual Return | 9.2% | 6.8% |
| Sharpe Ratio | 0.45 | 0.30 |
| Max Drawdown | -55% | -78% |
| Beta vs S&P | 0.9 | 1.2 |
| Annualized Volatility | 18% | 22% |
| Win Rate (years) | 14 out of 24 | 10 out of 24 |
Frequently Asked Questions
What's the best backtesting method for value vs growth?
Use a quant factor model with quarterly rebalancing and include transaction costs.
Does value investing still work in 2024?
Yes, historically the value premium persists, but it can underperform for long stretches.
How do I backtest without coding skills?
Use platforms like Portfolio Visualizer or TradingView's strategy tester.
What data source is most reliable?
CRSP and Compustat are standard for US stocks. Ken French data is free.
Can I combine value and growth strategies?
Yes, a blend reduces volatility and captures both premiums. Use 60% value and 40% growth.
Conclusion
Backtesting value vs growth is not theoretical. The data is clear: value gives better risk-adjusted returns. But growth has its moments. Use the discount code to access FTMO's platform and test your own strategies. Start now and avoid common pitfalls.
All firms · Today's offers · FTMO vs Apex
Discount codes and expiry dates are always shown before checkout. See how we rank firms on our methodology page.
PropFirmDiscountApp · Discount codes with expiry dates · See today's offers
Related Articles
Risk warning: Trading involves substantial risk of loss and is not suitable for every investor. Past performance is not indicative of future results. Prop firm evaluations are simulations, not regulated brokerage accounts.