VTV follows the tracks the CRSP US Large Cap Value Index and is one of the most widely followed value ETFs. CRSP includes sales/price and historical earnings/price ratio as well as 12-month forward earnings/price ratio and dividend yield to form its value indexes.
“The valuation gap between the Russell 1000 growth and value indexes is closing too. Growth stocks are trading at a 7% discount relative to value, given historical averages since 1979, according to Bank of America Merrill Lynch equity and quant strategist Savita Subramanian. A year ago, growth stocks were 17% cheaper than value,” reports Barron’s.
Value stocks usually trade at lower prices relative to fundamental measures of value, like earnings and the book value of assets. On the other hand, growth-oriented stocks tend to run at higher valuations since investors expect the rapid growth in those company measures, but more are growing wary of high valuations.
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