Value ETFs

This is one of a series of articles discussing smart beta ETFs. Other smart beta articles you can read:

A value ETF screens its potential holdings based on how expensive a company's stock market price is using measures like price to earnings or price to book value. Value investing is one of the oldest investing approaches, made famous by Ben Graham and David Dodd in their 1934 value investing classic "Security Analysis" and later popularized by Warren Buffett and others. Fama French, in their influential 1993 publication of their "three factor" model, stated that small size and value were the two most important factors to explain the outperformance of stocks over long periods of time. So there are a lot of believers in value investing.

There are a large number of value ETFs, as shown in this table:

Alternatives 2
Global Equity 68
US Equity 156
US Fixed Income1

The number of value ETFs continues to grow, as shown by this table:

Year of InceptionCount

Note that there were actually even more ETFs launched then this table shows, as we are only displaying the launch dates of ETFs still active in our database. There were more ETFs that were launched during these years that have since been closed down by their sponsor.

More and more ETFs are being launched that combine value investing with other investment factors:

Number of Factors UsedCount

Here are the ETFs that only use value as a factor (i.e. they are not multi-factor ETFs), if you want to read some examples of the approaches taken by value ETFs:

SymbolDescriptionInception DateCategoryActions
IVEiShares S&P 500 Value ETF05/22/2000US Equity Analyze
IWDiShares Russell 1000 Value ETF05/22/2000US Equity Analyze
IJJiShares S&P Mid-Cap 400 Value ETF07/24/2000US EquityAnalyze
IJSiShares S&P SmallCap 600 Value ETF07/24/2000US Equity Analyze
IWNiShares Russell 2000 Value ETF07/24/2000US Equity Analyze
SLYVSPDR S&P 600 Small Cap Value ETF09/25/2000US Equity Analyze
SPYVSPDR Portfolio S&P 500 Value ETF09/25/2000US Equity Analyze
IWSiShares Russell Mid-Cap Value ETF07/17/2001US EquityAnalyze
VBRVanguard Small-Cap Value ETF01/26/2004US Equity Analyze
JKFiShares Morningstar Large Value ETF06/28/2004US Equity Analyze
JKIiShares Morningstar Mid Value ETF06/28/2004US EquityAnalyze
JKLiShares Morningstar Small Value ETF06/28/2004US Equity Analyze
MDYVSPDR S&P 400 Mid Cap Value ETF11/08/2005US EquityAnalyze
RFVInvesco S&P MidCap 400 Pure Value ETF03/01/2006US EquityAnalyze
RPVInvesco S&P 500 Pure Value ETF03/01/2006US Equity Analyze
RZVInvesco S&P SmallCap 600 Pure Value ETF03/01/2006US Equity Analyze
MGVVanguard Mega Cap 300 Value ETF12/17/2007US Equity Analyze
IWXiShares Russell Top 200 Value Index Fund ETF09/22/2009US Equity Analyze
SCHVSchwab U.S. Large-Cap Value ETF12/11/2009US Equity Analyze
IVOVVanguard S&P Mid-Cap 400 Value ETF09/07/2010US EquityAnalyze
VIOVVanguard S&P Small-Cap 600 Value ETF09/07/2010US Equity Analyze
VOOVVanguard S&P 500 Value ETF09/07/2010US Equity Analyze
VONVVanguard Russell 1000 Value ETF09/20/2010US Equity Analyze
VTWVVanguard Russell 2000 Value ETF09/20/2010US Equity Analyze
CHEPQuantShares U.S. Market Neutral Value Fund ETF09/13/2011Alternatives Analyze
VLUSPDR S&P 1500 Value Tilt ETF10/24/2012US Equity Analyze
VLUEiShares MSCI USA Value Factor ETF04/16/2013US Equity Analyze
SYVSPDR MFS Systematic Value Equity ETF01/08/2014US Equity Analyze
GVALCambria Global Value ETF03/11/2014Global Equity Analyze
WBIFWBI Large Cap Tactical Value Shares ETF08/25/2014Global EquityAnalyze
IVLUiShares MSCI International Developed Value Factor ETF06/16/2015Global EquityAnalyze
SPVUInvesco S&P 500 Value Portfolio ETF10/09/2015US EquityAnalyze
VFVAVanguard U.S. Value Factor ETF02/14/2018US EquityAnalyze
EWJViShares MSCI Japan Value ETF03/07/2019Global Equity Analyze

Value versus Pure Value Indexes

Each of the major index providers has their own approach to creating a value index. But generally speaking, during the 1990's the index providers adopted a fairly consistent approach to creating "value" and "growth" indexes. Generally speaking, every stock in an index universe, such as the S&P 500 Index, was classified into one of three buckets: 1) stocks that were primarily value stocks; 2) stocks that were primarily growth stocks; and 3) stocks that were not strongly growth or value stocks. This third category of stocks was labeled either "core" or "blend" or "neither" stocks.

When creating a "value" index during the 1990's, most index providers included in the "value" index stocks from the value bucket and stocks from the "blend" or "core" bucket (buckets #1 and #3). At the same time, most index providers created a second "pure value" index that included only the stocks in the "value" index.

SPYV, the SPDR S&P 500 Value ETF, is a good example of an ETF that follows a "value" index, while RPV, the Guggenheim S&P 500 Pure Value ETF, follows the "pure value" index.

In the past ten years, this older framework of everything being a "value" or a "growth stock" has been largely superseded by the concept of multi-factor investing, or smart beta investing. But many of these older "value" and "growth" ETFs continue to be around and continue to have a large amount of assets under management.

Does value investing work?

Let's look first at the performance of some of the oldest value ETFs. If you look at our tool ETFs that have outperformed SPY since inception, there are 20+ "value" ETFs on that list. Many of the value ETFs have performed really well. What makes it difficult to analyze, however, is that most of these well performing value ETFs are also small and mid cap ETFs, or total market ETFs. Did they outperform because of the size factor or the value factor?

If you look at price charts of some of the oldest value ETFs against their respective benchmarks, the performance of value ETFs is not that amazing. If the value factor exists, it is difficult to tell from current price charts. Let's run through some examples.

IVE, the S&P 500 Value ETF, is one of the oldest of the value ETFs. It selects stocks from the S&P 500 using value measures:

IJJ, the iShares S&P MidCap 400 Value Index Fund ETF, is one of the oldest of the value ETFs. It selects mid cap stocks using value measures:

IJS is one of the oldest of the small cap value ETFs. It tracks the S&P 600 Small Cap Value Index, one of the oldest small cap indices:

IWN is also one of the biggest and oldest of the small cap value ETFs. It tracks the Russell 2000 Value Index, another one of the oldest small cap indices:

If the value factor exists, it is subtle. Or perhaps no longer exists as a significant factor because over time too many investors have used value investing such that it has been "played out". Or perhaps it has been out of favor for a while, but will eventually come back. If you look at the ratio of IVE to SPY, you can see that the "value factor" has been declining for quite a few years now:

Academic factor research has also "waffled" a little bit on whether the value factor is important. In their five factor model, Fama French state that the value factor (what they call HML) is redundant: "the five-factor model never improves the description of average returns from the four-factor model that drops HML (Table 5). The explanation is interesting. The average HML return is captured by the exposures of HML to other factors. Thus, in the five-factor model, HML is redundant for describing average returns, at least in U.S. data for 19632013." Hou Xue and Zhang don't use value as a factor in their updated four factor model published in 2015.

Perhaps the value premium exists but it is so closely tied to the size factor that it is difficult to isolate. Fama French state in their 5 factor model:

The value, profitability, and investment factors are averages of small and big stock factors. Here again, joint controls produce interesting changes in the premiums for small and big stocks (Panel A of Table 4). The factors from the 2 3 and 2 2 sorts confirm earlier evidence that the value premium is larger for small stocks (e.g., Fama and French, 1993, 2012; Loughran, 1997).

One thing we do at is give each ETF a rating for long term investors. Here are the value ETFs that we have rated as an "editors choice"

SymbolDescriptionInception DateCategoryActions
PSJInvesco Dynamic Software ETF06/23/2005US EquityAnalyze
CZAInvesco Mid-Cap Core ETF04/02/2007US EquityAnalyze
FDTFirst Trust Developed Markets Ex-US AlphaDEX ETF04/18/2011Global Equity Analyze
MOATMarket Vectors Morningstar Wide Moat ETF04/24/2012US EquityAnalyze
CAPEBarclays Shiller CAPE Index ETN10/10/2012US Equity Analyze
FLQEFranklin LibertyQ Emerging Markets ETF06/01/2016Global EquityAnalyze

You can see a list of all ETFs that are using value as an investment factor using our ETF screener.

All data is a live query from our database. The wording was last updated: 04/09/2020.

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