1. Frontier Asset Management Value versus Growth Investment Strategies in Mexico
Robert Gordon
Rick Kahn
David Pykon
Manny Teixeira
Ken Weinberg

2. Objective
To develop an investment strategy that is able to consistently outperform the Mexican index by shifting between value and growth portfolios.

3. Methodology
Analysis based on univariate sorts of stocks for two variables (P/B & P/E) into high, medium & low fractiles
Utilized monthly data from
Assume low price-to-book = “value portfolio”
Assume high price-to-earnings = “growth portfolio”

4. Mexican Economy (1991-1997) Average returns of 29% from 1991-1993
Political Stability/Announcement of NAFTA
12/94: Economic Crisis - peso devalued
Index drops over 50% over the next 3 months
Average returns of -8% from
Hyperinflation of 40% per year from

5. General Data Observations
The growth portfolio significantly outperforms the value portfolio and the index since the Mexican crisis (surprising, given the poor results in the overall market)
The growth portfolio outperforms the value portfolio by 900 basis points during the 3 months following the peso devaluation in 12/94
Growth vs. value portfolio correlation = 81% Correlations to Index = 90%

7. Overall Results
The growth portfolio exceeds the value portfolio each year and beats the index in nearly 60% of the months sampled
The value portfolio underperformed on average - beating the index only 45% of the time
No consistent patterns of outperformance in years following +/- 10% changes in the index portfolio
The growth portfolio resulted in less volatility than the value or index portfolio

8. Application
Should we shift assets???

9. Questions???