Profitability (RMW)
⚠ weakenedQuality· Price data
Robust-minus-weak operating profitability: more profitable firms earn higher returns. The economic intuition aligns with both risk (profitable firms are harder to distress) and mispricing (investors underweight cash flow quality). Relatively recent publication; the post-publication sample is short.
IS Sharpe (1963–2014)
0.558
+3.3% p.a.
OOS Sharpe (2015–2026)
0.292
+2.5% p.a.
Sharpe decay
+47.7%
(IS − OOS) / |IS|
IS vol
5.9%
annualized
Cumulative return (last 40 years, monthly)
+331%1986-012026-04
Publication details
PaperFama & French (2015); Novy-Marx (2013)
JournalJournal of Finance
Publication year2015
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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