A comment was left on my posting The Slippery Meaning of Value in ETFs and Indexes stating that there was a problem in 2000-2002 that revealed the weakness of the simple price/book metric used by S&P for its Value indexes, which led to the inclusion of all sorts of other metrics to better assess 'value' by Russell, MSCI, Morningstar and Dow Jones/Wilshire. The comment concluded that I should compare the Russell with the S&P ETFs to see how the S&P underperformed compared to them and to the index. So here are some comparisons based on charts from Yahoo.
Both IVE, the iShares S&P Large Cap Value fund, based on the p/b metric, and IWD, the iShares Russell 1000 Large Cap Value fund, based on all sorts of other metrics, far outstrip the S&P 500 index, though the Russell is ahead during the period 2000-2002 but pretty well only during that period. see this first chart.
Again, both IJS, the iShares S&P 600 Small Cap Value fund, the one based on the p/b metric and the IWM iShares Russell 2000 Value fund (the small cap fund most comparable to IJS) outstrip the S&P 500 index. IJS outperformed IWM particularly in the 2000-2002 period. It is interesting that IWM tracks the overall market value index IWW, the Russell 3000, much more closely than IJR. see this second chart.
What does all this tell us? First, in the grand scheme of things, the seven years from 2000 to today isn't very long, so any conclusions are rather tentative. Second, both the large and small cap iShares ETFs seem to have return streams significantly enough different from the overall S&P 500 to make them useful diversifiers, as do the Russell funds. Third, the divergence of the large cap version IVE seems to have been temporary and confined to the period 2000-2002. Fourth, the similarity of performance of IWM and IWW seem to make IWM less useful as a diversifier for small caps.
Overall, the iShares value ETFs, using the original value measure of price to book ratio as uncovered in financial research, seems to have done the job, especially for small caps, though less so for large caps. In that light, why develop all these fancy, complicated alternate measures of value, none of which are proven in the long term?