Value, profitability and momentum are three well-established investment factors. But does the historical evidence for these factors differ between emerging and developed markets, and what might that mean for investors in practice?
Our latest research examines these three investment factors across emerging and developed markets. It looks beyond academic findings to explore how consistent the historical results have been, what happens when factor strategies are translated into long-only portfolios, and why implementation costs matter.
For financial advisers only. This research is intended for financial advisers and must not be distributed to retail clients.
The starting point
Three factors, three different stories
A factor is a characteristic shared by a group of investments. This paper focuses on:
Value: companies that appear cheaper relative to measures such as their book value.
Profitability: companies with stronger profits. The research uses this as a measure of quality.
Momentum: companies whose shares have performed strongly in the recent past.
Timeline's analysis identifies historical evidence of factor premia in emerging markets. However, the strength and consistency of that evidence, and the extent to which investors could have captured the returns, vary between factors.
What the data shows
Value and momentum stand out in the academic data
Using regional factor data from the Kenneth R. French Data Library1, Timeline's analysis found that the emerging markets value factor generated an average historical premium of 7.6% a year, compared with 3.1% in developed markets, from July 1990 to May 2026. For momentum, the corresponding figures were 10.8% and 6.9% respectively, from November 1990 to May 2026.
These figures are based on academic long-short factor portfolios, which buy shares with a desired characteristic and sell shares at the other end of the scale. They are useful for examining historical factor premia, but do not represent the returns an investor would have received from a conventional long-only fund.
The distinction that matters
A strong historical academic factor premium does not mean a long-only investor could have captured that premium in full.
Profitability also showed a positive historical premium in emerging markets. However, Timeline's analysis did not consistently find evidence that the premium was stronger there than in developed markets.
Past performance is not a reliable indicator of future results. The returns in this article are in US dollars and may increase or decrease as a result of currency fluctuations.
A more practical test
What happens when investors can only buy and hold?
To examine an approach closer to that of a long-only investor, Timeline's research also compares emerging markets value and high profitability portfolios with a broad emerging markets portfolio. The analysis uses market-capitalisation-weighted portfolios from the Fama/French Emerging Markets index series2, constructed using the underlying factor classifications.
From July 1991 to June 2026, the value portfolio delivered an annualised return of 11.2%, compared with 8.6% for the broad emerging markets portfolio. This represents a difference of 2.6 percentage points a year. The high profitability portfolio returned 10.7%, or 2.1 percentage points above the broad market portfolio.
These results show a smaller historical return advantage than the academic long-short figures. They also highlight a difference between the two factors. Over the full period examined, value delivered a larger annualised return advantage, while profitability outperformed the broad market more consistently across rolling ten-year periods.
In fact, Timeline's analysis of the same Fama/French series found that the high profitability portfolio outperformed the broad emerging markets portfolio in 97% of rolling ten-year periods3, compared with 80% for value. Value also experienced a prolonged period of weak relative performance, demonstrating that even historically strong factor premia can be difficult to capture consistently.
The paper does not include an equivalent long-only momentum portfolio. Its academic results therefore require particular care in interpretation, especially as momentum strategies can involve more frequent trading.
Putting the evidence to work
The opportunity and the cost can come from the same place
Emerging markets may offer conditions in which factor premia persist, including differences in analyst coverage, disclosure and the speed at which information is reflected in share prices. However, some of those same features can make shares harder or more expensive to trade.
That makes implementation central to the investment case. Fund charges, trading costs, turnover and portfolio construction all affect how much of a historical premium an investor might retain. Historical performance, including the results examined in this research, is not a reliable indicator of future returns.
What the research concludes
The details matter as much as the headline premium
Timeline's analysis of historical academic factor data found stronger premia for emerging markets value and momentum than for their developed markets counterparts. In the long-only analysis, value and high profitability both outperformed the broad emerging markets portfolio over the period examined, with profitability showing a more consistent pattern of relative returns across rolling ten-year periods.
The paper explores what these historical findings could mean for a diversified factor approach, while examining the costs and practical limitations that can affect investor outcomes. Past performance is not a reliable indicator of future results.
Explore the full research
Want to explore the findings in more detail? Download the full research paper for the methodology, historical results, supporting charts and considerations for implementing factor strategies in emerging markets.
For financial advisers only
Access the full research paper, including the methodology, sources and implementation considerations. Not for retail distribution.
Important information
This blog is prepared exclusively for use by financial advisers and must not be distributed to retail clients. It does not constitute advice, an offer or a solicitation to invest.
Compiled from sources believed to be reliable. Any views, opinions or estimates expressed, including any forecasts or forward-looking statements, constitute the author’s judgement at the time of writing, are not guaranteed and are subject to change without notice. None of Timeline, its directors, officers or employees accepts liability for any loss arising from the use hereof or reliance hereon or for any act or omission by any such person, or makes any representations as to its accuracy and completeness.
Past performance is not a reliable indicator of future results. Academic research portfolios generally exclude transaction costs and market impact and do not represent returns an investor could necessarily achieve. Investments and their income can fall as well as rise, and investors may receive back less than they invested.
Sources and Notes
- Timeline analysis of Kenneth French Data Library, May 2026 vintage. Monthly long-short factor returns in US dollars, gross of fees and trading costs. Figures are annualised arithmetic means using the longest common emerging and developed markets sample for each factor.
- Fama/French Emerging Markets index series via Dimensional. Monthly US dollar returns, July 1991 to June 2026. The broad Fama-French Emerging Markets market portfolio is used as the benchmark. Annualised returns are compound annual growth rates, gross of fees and trading costs.
- Timeline analysis of Fama-French Emerging Markets long-only portfolio series, July 1991 to June 2026. Rolling ten-year returns are calculated relative to the broad emerging markets portfolio, gross of fees and trading costs.
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