Should financial advisors care? Absolutely. If the classic strategies of active and passive investing are more closely aligned in favor of value investing than previously recognized, the union lends more authority to a value-informed view of investing strategies generally. This is true for both stock pickers and those using index mutual funds and ETFs to build portfolios.

In other words, we're all value investors now, or at least we all should be. That's the message in the financial literature. A more practical-minded review of market history only strengthens the case.

Consider, for instance, the Boston-based GMO LLC, a value-oriented investment firm that's been warning clients for several years that high market valuations threatened the outlook for equities. Its long-term forecast for ten asset classes published a decade ago now looks unusually prescient. GMO's ten-year outlook for U.S. stocks in 1998 called for a roughly 1% annual loss for the S&P 500 for 1998-2008. The actual performance was essentially flat.

Sage insight, or just dumb luck? No one can say for sure either way, of course. But this much is clear: GMO and other like-minded value shops had been advising clients for several years ahead of 2008 that lofty valuations and unattractive investment prospects were a clear and present danger. So it was hardly rank speculation. Rather, the increasingly cautious outlook among value investors was driven by a pragmatic reading of the fundamentals.

True, the warnings came too early for some investors. Anybody who followed the advice would have had to turn cautious and sacrifice some return at the height of the most recent bull market, one that ran on longer than many thought possible. But in hindsight, it looked like a small price when you consider what happened to the perma-bulls.

One way to look at the market was through the lens of the Tobin's Q ratio, a measure developed by Nobel laureate economist James Tobin that compares a company's market value to its equity book value. In essence, the metric summarizes the current market valuation of a company relative to the replacement cost, or the amount the company would have to pay at the present time to replace any of its assets. Calculating the history of Tobin's Q for the stock market from 1900 to the present reveals a number of major peaks and valleys through the decades.

What stands out in recent years is the Q ratio's unprecedented valuation surge in 2000-which rose to roughly 120% of replacement value, according to calculations by Smithers & Co., a London investment consultancy. Some 20 years earlier, the ratio was bouncing around at roughly 60% of replacement cost. As it turned out, buying stocks in the early 1980s and turning defensive during the late 1990s would have been the best thing an investor could have done.

Indeed, shortly after the 2000 stock market peak there came a severe bear market. When the selling ended in 2002, the market's lofty valuation was sharply deflated, according to the Q ratio. Even so, the market wasn't as cheap as it had been for much of the entire 20th century, so the value crowd remained wary, even as the bulls went into overdrive in 2006 and 2007.

The larger point is that the Q ratio shows what economists call a mean-reverting tendency, so stocks in the aggregate go through periods of undervaluation and overvaluation, just as Graham and Dodd explained in 1934. Alas, in the short term, such signals are of little help. Even over longer periods, it's difficult to estimate future investment returns, which is an inexact science. So the Q ratio, like other valuation metrics, is subject to interpretation and various forms of calculation. Simply put, there's still no crystal ball for making investment decisions. But investors do have a great deal of context in which to make those decisions, if only they would look.

"Value gives you very little guide for what's going to happen in the shorter term," warns Andrew Smithers of Smithers & Co. That said, the Q ratio can be a valuable tool in those rare cases when it's at extreme levels, he says. Such was the case in 2000, when the ratio was screaming of excess valuation in the stock market. At that point, turning cautious looked compelling in real time, based on both the Q ratio and other valuation metrics.