Arnott’s work shows that in bear markets caused by the bursting of an asset bubble, “value wins big.” For example, after the tech bubble of 2000 or Nifty 50 burst in the 1970s. However, when a bear market is caused by a macroeconomic shock, like the global financial crisis, value tends to perform as badly as the broader stock market or worse.

“What do we have now? We have macroeconomic driven bear market and the bubble has not yet burst,” Arnott said. “So if we have a second leg to the bear market, my prediction would be that it will be a bubble bursting portion of the bear market.”

This article was provided by Bloomberg News.

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