Outperformance of Low Risk / Value Stocks

Last week I have attended a interesting presentation by Prof. Haugen organised by the Swiss CFA Society.
 Mr Haugen made very convincing case for low risk value stocks. These are stable stocks with a sound business which generates nice but stable (not fast growing stocks) stocks with attractive dividends reasonably priced. His empirical research proved that these stocks are outperforming the market consistently over the last 80 years.

His explanation in his 2008 paper "Case Closed":
..."we feel that the market overreacts to past record of success and failure on the part of companies, making relatively expensive (growth) stocks too expensive and relatively cheap (value) stocks too inexpensive. After the initial overreaction, the market tends to correct itself, producing low returns to expensive growth stocks and high returns to cheap value stocks, as the relative profitability of these companies tends to mean-revert faster than expected."

This paper has very important implications for stock selection, and provides the empirical evidence for the successful value approach of Warren Buffet.