Intangible return using CFtoP

⚠ weakened

IntanCFPReversal· Accounting data

In each month, run a cross-sectional regression of a firm's five-year stock return on the 5 year lagged CFP = (net income (ni) plus depreciation (dp))/market value of equity and a constructed regressor that is the change in CFP from 5 years ago to today plus the five-year stock return. The residual from that regression is IntanCFP.

IS Sharpe (1956–2005)

0.345

+3.8% p.a.

OOS Sharpe (2006–2024)

0.310

+4.0% p.a.

Sharpe decay

+10.1%

(IS − OOS) / |IS|

IS vol

11.1%

annualized

Cumulative return (last 40 years, monthly)

+215%

1984-012024-12

Publication details

AuthorsDaniel and Titman

PaperDaniel and Titman (2006)

JournalJournal of Finance

Publication year2006

Original sample1968–2003

IS T-statistic4.89

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