Value and Interest Rates: Are Rates to Blame for Value’s Torments? (Summary)

Topics - Value Factor/Style Investing Equities

${ numberSection } ${ text }
Value and Interest Rates: Are Rates to Blame for Value’s Torments? (Summary)

This brief summary of our paper “Value and Interest Rates” presents our findings on the effect of the interest rate environment on value’s prospects. 

The interest rate environment –- the low level of interest rates, falling bond yields, or the flattening yield curve – has been blamed by some for value stocks’ sharp underperformance of growth stocks from 2017 to early 2020, exacerbating a longer period of lackluster performance dating back to the Global Financial Crisis for some value factors. 

This summary highlights the ambiguous theoretical links between value and interest rates, reviews the varied historical patterns between value and different aspects of the rate environment, and presents a case study on value and rates in Q1 2020. 

The full paper delves deeper and finds that despite some eye-catching patterns in recent data, particularly those related to changes in bond yields or the yield curve slope, the relationships between the interest rate environment and value are unstable and have limited economic significance. We conclude that the rate environment tells us little about value’s prospects, and that a change in that environment is not a necessary condition for value’s recovery.


AQR Capital Management, LLC, (“AQR”) provide links to third-party websites only as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked sites. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which has no control. In no event will AQR be responsible for any information or content within the linked sites or your use of the linked sites.

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.


Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight.  Hypothetical performance results are presented for illustrative purposes only.


Diversification does not eliminate the risk of experiencing investment loss.


Certain publications may have been written prior to the author being an employee of AQR.

This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor.


AQR Capital Management is a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described herein. The views expressed here are those of the authors and not necessarily those of AQR.