Coruscation

Let's slice the market another way. Growth stocks outperformed value stocks last year. Investment newsletters often argue that this means growth stocks are likely to do so in 2010 as well. Though not every adviser agrees on how to define these two types of stocks, researchers generally rely on the ratio of price to book value per share. Stocks with the highest ratios are deemed growth stocks, while those with the lowest ratios are considered value stocks.

Using these definitions, the finance professors Eugene F. Fama of the University of Chicago and Kenneth R. French of Dartmouth have calculated the returns of both categories back to 1926. But their database shows no correlation in performance from one year to the next for either class. That means that, while growth stocks this year may very well continue to lead the market, whether they do so won't be determined by their 2009 performance.

There are good reasons for these findings, according to Lawrence G. Tint, chairman of Quantal International, a firm that conducts risk modeling for institutional investors. Mr. Tint said that if the market's return in one year were a predictor of its return the next year, "investors would rush in on Jan. 1 to buy or sell, depending on the direction of the anticipated movement."

"We can be comforted by the fact that reasonably efficient markets always base their level on anticipated future returns," he added, "and do not include history in the calculation."