A value portfolio ranks the universe on a valuation metric and overweights the cheapest decile. The classic academic construction goes long cheap and short expensive, isolating the spread rather than holding market exposure.
Two explanations compete. The risk story says cheap companies are cheap because they are fragile, so the extra return is payment for bearing distress that bites in recessions. The behavioural story says investors extrapolate bad news too far and price these companies below fair value.
Value has endured long droughts, including a stretch after 2007 severe enough to prompt serious debate about whether book value still measures anything for firms whose assets are intangible. Any value allocation needs a horizon long enough to survive that, and a definition of the metric decided in advance. See pe-ratio.
Related: factor-investing, pe-ratio, size-factor, quality-factor, fama-french-three-factor, style-drift