operating profits / book equity
✓ aliveOperProfQuality· Accounting data
Revenue (revt) minus cost (cogs) - administrative expenses (xsga) - interest expenses (xint), scaled by book value of equity (ceq). Exclude smallest size tercile.
IS Sharpe (1963–2005)
0.438
+5.7% p.a.
OOS Sharpe (2006–2024)
0.549
+5.3% p.a.
Sharpe decay
-25.3%
(IS − OOS) / |IS|
IS vol
12.9%
annualized
Cumulative return (last 40 years, monthly)
+1737%1984-012024-12
Publication details
AuthorsFama and French
PaperFama and French (2006)
JournalJournal of Financial Economics
Publication year2006
Original sample1977–2003
IS T-statistic2.55
More Quality anomalies
gross profits / total assets+0.81Percent Total Accruals+0.79Return on assets (qtrly)+0.74Change in order backlog+0.74Mohanram G-score+0.58Operating profitability R&D adjusted+0.55
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