By Mitchell Mauer at The Stock Market Blueprint Blog.

Let’s admit it. As value investors, we all have a value investment bias. In fact, all investors are bias toward their preferred approach.

Confirmation bias is rampant in all walks of life – politics, religion, fad diets, favorite sports teams, etc. Investing is no different.

Wherever opinions and counter opinions come together, people are bound to actively seek evidence that confirms their opinions.

Embrace Your Value Investment Bias

Most experts claim to be above this phenomenon by insisting it does not affect them. Rather than denying or hiding your value investment bias, I’m going to make it easy for you to embrace it.

Below are five scholarly articles which will validate your value investment bias. These studies are well-accepted throughout both the academic and professional investment communities.

Value versus Growth

Fama, Eugene F. and French, Kenneth R., Value versus Growth: The International Evidence, 1997.

Abstract:

Value stocks have higher returns than growth stocks in markets around the world. For 1975-95, the difference between the average returns on global portfolios of high and low book-to-market stocks is 7.60% per year, and value stocks outperform growth stocks in 12 of 13 major markets. An international CAPM cannot explain the value premium, but a two-factor model that includes a risk factor for relative distress captures the value premium in international returns.

Does the Stock Market Overreact?

De Bondt, W. F. M. and Thaler, R., Does the Stock Market Overreact?, 1985.

Abstract:

Research in experimental psychology suggests that, in violation of Bayes’ rule, most people tend to “overreact” to unexpected and dramatic news events. This study of market efficiency investigates whether such behavior affects stock prices. The empirical evidence, based on CRSP monthly return data, is consistent with the overreaction hypothesis. Substantial weak form market inefficiencies are discovered. The results also shed new light on the January returns earned by prior “winners” and “losers.” Portfolios of losers experience exceptionally large January returns as late as five years after portfolio formation.