Applicability of Rosenberg's Beta Factor Decomposition Analysis to the Construction of a Growth Stock Portfolio within the Standard & Poor's 1500 Index

Since the turn of this Century, there has been a decided investment bias towards value over growth in the selection of stock portfolios by investors. Growth portfolios have lagged considerably. This could be due to the change in the risk orientation of investors. It could also be due to the fact that growth portfolio construction has remained fixated on ex-ante growth prospects without taking into account this possible shift in investor psychology, especially after 9/11. One of the most important papers in the origin of Modern Portfolio Theory, authored by Barr Rosenberg, decomposed the then-relatively unexplored concept of beta of the Capital Asset Pricing Model. This paper re-explores this extremely important initial academic work to see whether its conclusions could be applied to the construction of a growth stock portfolio to enhance its return. This "back to the future" approach appears to have investment merit in the construction of growth stock portfolios. [PUBLICATION ABSTRACT]