High Minus Low (HML)

High Minus Low (HML) is a financial metric used to compare the returns of stocks that are considered "value" stocks versus "growth" stocks. Value stocks are typically undervalued and trading at lower prices relative to their fundamentals, while growth stocks are expected to grow faster and usually trade at higher prices. HML measures the performance difference between these two groups: it subtracts the return of high-price-to-earnings (growth) stocks from low-price-to-earnings (value) stocks. A positive HML indicates value stocks outperformed growth stocks, suggesting a potential shift toward undervalued stocks in the market.