Short-Term Rates on Growth and Value

I was curious to see what the impact of changes in short-term interest rates is on growth and value stocks.

I used the Vanguard Growth (VIGRX) and Vanguard Value (VIVAX) funds as proxies and looked at how they reacted to changes in the 90-day T-bill. The data goes back to 1993.

I found that there were 1,737 days when short-term rates fell, 1,739 days when short-term rates rose and 950 days when short-term rates stayed the same. I then averaged out those periods to annualized periods.

When short-term rates fell, Value fell by 21.78% while Growth fell by 18.96%.

When short-term rates stayed the same, Value rose by 16.65% and Growth rose by 19.10%.

Finally, when short-term rates rose, Value rose by 42.54% and Growth rose by 36.13%.

Posted by Eddy Elfenbein on November 8th, 2010 at 2:08 pm

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