Growth and value are two investment styles based on fundamental analysis. A growth company typically has promising earnings potential and tends to invest more in future growth rather than dividend payouts, while a value company tends to be more established, with stable growth rates and dividend distributions.
While most market participants are familiar with single-style investment strategies, rotating between growth and value could help enhance return potential. The recently launched S&P 500 Growth Value Rotator Index uses a simple momentum rotation signal to switch between growth and value strategies, and it outperformed single-style benchmarks and the broad equity market with lower risk (see Exhibit 1).
Studies,  have not shown any strong evidence that one style consistently outperforms the other. If we use the S&P 500 Growth and the S&P 500 Value to represent growth and value stocks, we can see that growth stocks outperformed value stocks 51% of the time, while value stocks produced better returns 49% of the time, both on a total return basis, from January 1995 to July 2019.
The goal of the S&P 500 Growth Value Rotator Index is to take advantage of the two styles. It shifts between growth and value strategies based on the momentum rotational signal, calculated as the 12-month return of the growth or value indices. The strategy is constructed as an index of indices, taking the total returns of the S&P 500 Growth Index and S&P 500 Value as the underlying benchmarks. At the end of each month, if the 12-month return of the S&P 500 Growth is greater than the 12-month return of the S&P 500 Value, the index allocates to the S&P 500 Growth, and vice versa. The existing index selection remains unchanged if the one-year returns of growth stocks and value stocks are the same.
The S&P 500 Growth Value Rotator Index delivered significant outperformance from February 1995 to July 2019, producing an average monthly excess return of 0.15% over the overall stock market, as measured by the S&P 500. In addition, the index outperformed the S&P 500 Growth and the S&P 500 Value by 1.38% and 2.75% on an annualized basis, respectively. The reduced volatility enabled the S&P 500 Growth Value Rotator Index to achieve the highest risk-adjusted return among the individual style indices and the S&P 500 (see Exhibit 1).
The outperformance of the S&P 500 Growth Value Rotator Index was most evident in long-term horizons. In the 10-, 15-, and 20-year periods ending in July 2019, the strategy demonstrated consistent outperformance over the single-style strategies and the broad market, on an absolute and risk-adjusted return basis (see Exhibit 2). Over short-term horizons (the three- and five-year periods), the S&P 500 Growth Value Rotator Index notably outperformed the S&P 500 Value and the S&P 500, while its return slightly underperformed the S&P 500 Growth. This is not surprising since the market has been in an expansion stage in recent years. Furthermore, the S&P 500 Growth Value Rotator Index exhibited the smallest maximum drawdown of 49.73%, compared with 56.82%, 53.40%, and 50.95% for the S&P 500 Value, the S&P 500 Growth, and the S&P 500, respectively.
 N. Beneda  Growth Stocks Outperform Value Stocks Over the Long Term
 A. Ang  Value Investing: The Long-term Appeal of the Underdog; Grow is not the Opposite of Value