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Value Fund

Value Fund

What is a 'Value Fund'

A value fund is a stock mutual fund that primarily holds stocks that are deemed to be undervalued in price and that are likely to pay dividends. Value funds are one of three main mutual fund types; the other two are growth and blend (a mix of value and growth stocks) funds.

Explaining 'Value Fund'

Every large mutual fund family has a value fund component in which funds are often broken down by size. For example, a fund family may include small-, mid- and large-cap value funds for investors to choose from. The premise of value investing is that the market has inherent inefficiencies that enable companies to trade at levels below what they are actually worth. In theory, once the market corrects these inefficiencies, the value investor will see the share price rise.

A common misconception is that value investors simply seek out stocks with low price/earnings ratios. Although this can be a characteristic of an undervalued company, this is not the sole feature that astute value investors seek.


Further Reading

The economics of short-term performance obsessionThe economics of short-term performance obsession
www.tandfonline.com [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

The law and economics of hedge funds: Financial innovation and investor protectionThe law and economics of hedge funds: Financial innovation and investor protection
heinonline.org [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

Corporate research and development expenditures and share valueCorporate research and development expenditures and share value
www.sciencedirect.com [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

Rational herding in financial economicsRational herding in financial economics
www.sciencedirect.com [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

Experiential learning for undergraduates in economics and finance: A true top-down investment fundExperiential learning for undergraduates in economics and finance: A true top-down investment fund
www.jstor.org [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

The economics of structured financeThe economics of structured finance
www.aeaweb.org [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

Board structure and fee-setting in the US mutual fund industryBoard structure and fee-setting in the US mutual fund industry
www.sciencedirect.com [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

What is behavioral finance?What is behavioral finance?
papers.ssrn.com [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …

Money order debit from stored value fundMoney order debit from stored value fund
patents.google.com [PDF]
… The Economics of Short-Term Performance Obsession … Are stock prices likely to allocate financial resources efficiently when short-term earnings dominate investment decisions … A company's value depends on its long-term ability to generate cash to fund value-creating growth …


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