The Investment Scientist

July 2008 marks the start of a bear market after all major market indices have fallen more than 20% from their most recently peaks. This article is part two of my three-part research on bear markets. In part one, I researched how long a typical bear market lasts?. In this installment I ask this question:

Which style fared the best in a one-year time frame after stocks have entered a bear market?

There are four primary styles of stock investing: Small Cap Value (SV), Small Cap Growth (SG), Large Cap Value (LV), and Large Cap Growth (LG). Typically, before stocks enter into a bear market, Small Cap stocks, regardless of value or growth, get hit the hardest.

Using data provided by Fama/French benchmark style portfolios, I calculated one-year returns of the four investment styles from the month stocks entered a bear market. The results are tabulated below.

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