Intangible return using EP

⚠ weakened

IntanEPReversal· Accounting data

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

IS Sharpe (1956–2005)

0.419

+3.8% p.a.

OOS Sharpe (2006–2024)

0.290

+3.0% p.a.

Sharpe decay

+30.8%

(IS − OOS) / |IS|

IS vol

9.2%

annualized

Cumulative return (last 40 years, monthly)

+135%

1984-012024-12

Publication details

AuthorsDaniel and Titman

PaperDaniel and Titman (2006)

JournalJournal of Finance

Publication year2006

Original sample1968–2003

IS T-statistic4.64

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