Operating profitability R&D adjusted
✓ aliveOperProfRDQuality· Accounting data
Revenue (revt) minus cost (cogs) - (administrative expenses (xsga) - R&D expenses (xrd)), all divided by total assets (at) in year t. Replace all variables in the numerator with 0 if they are missing. Exclude if share code is greater 11, market value of equity, BM or total assets are missing, or if SIC code between 6000 and 6999.
IS Sharpe (1963–2015)
0.285
+4.3% p.a.
OOS Sharpe (2016–2024)
0.545
+10.8% p.a.
Sharpe decay
-91.2%
(IS − OOS) / |IS|
IS vol
14.9%
annualized
Cumulative return (last 40 years, monthly)
+2519%1984-012024-12
Publication details
AuthorsBall et al.
PaperBall et al. (2016)
JournalJournal of Financial Economics
Publication year2016
Original sample1963–2014
IS T-statistic1.84
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 profits / book equity+0.55
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