The choice of investment style - growth or value stocks - is as important in determining returns of non-U.S. markets as it is in the United States, according to a new study by Parametric Portfolio Associates, Seattle.
While Parametric found this to be true for 18 of 20 markets (including the United States) the firm studied between January 1990 and June 1995, it was especially true for the markets of Japan, Germany and the United Kingdom, according to Cliff Quisenberry, research manager with Parametric.
Only the markets of Australia and the Netherlands strayed from the pattern.
The Australian stock market is dominated by a particular industry, the mining sector, he explained.
In the Netherlands, Royal Dutch Petroleum - which some view as a growth stock but others as a value stock - might have a distortional effect because the stock comprises about one-third of the market's capitalization, according to Parametric.
And style effects were not as strong in some of the Asian markets, according to Mr. Quisenberry. In the newer markets of Asia, investors might not yet have begun to distinguish between style characteristics, Mr. Quisenberry added.
While the study did not determine which style - growth or value - has been dominant in overseas markets, the Parametric did find preferred styles changed periodically, as they do in the United States.
The conclusion: Investors need to be conscious of style when making investment bets overseas. If investors are not making deliberate style choices, they should try to keep their portfolios neutrally weighted between growth and value holdings to control risk, Mr. Quisenberry said.
