Some researchers have argued that Value Line's outperformance resulted from their use of earnings surprises and price momentum while others have suggested that the model portfolio's outperformance resulted from assuming higher risk. In the article, Black confessed that previously he had been a strong believer in the efficient market hypothesis and passive management. Yet his research of Value Line's rating system, confirmed that the system did produce significant excess returns over a five year period. In an attempt to match the returns of the top rated stocks, Value line established a mutual fund. On the other hand, Value Line continues to be one of the highest ranked newsletters by the Hulbert Financial Digest which does account for costs.
Transactions costs can significantly reduce returns particularly in portfolios with high turnover.
Its also important to note that a court order in the 1960's mandated a delay between publication of Value Line rating changes and trading in the portfolio. Investors may interpret this as an example of how difficult it may be to profit from an anomaly. Perold has written extensively on implementation shortfall and how to measure it. Strategies that seem to offer an investor an advantage may not work in real world conditions because of transactions costs and other costs. Perold has also argued that the larger a portfolio is, the harder it is to exploit any informational advantage.