// STUDY RESULT · 1998-01 TO 2026-09

Inspired by Gray and Carlisle: Quantitative Value

DATA VALIDATED

Screen out likely manipulators and distressed firms, buy the cheapest stocks on EBIT / enterprise value, then keep the highest quality. The book tests many value ratios and picks EBIT/EV as the best single measure.

How this run differs from the source: Free cash flow over market cap instead of EBIT over enterprise value, and the quality step runs before the value step.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	19.5%	9.3%
Sharpe ratio	0.95	0.66
Max drawdown	-49.5%	-50.9%

// GROWTH OF $1, LOG SCALE

AMBER: THE STRATEGY · GREY: $SPXTR BUY & HOLD

Out-of-sample (from the split): CAGR 18.6% against 14.0% for the benchmark; Sharpe 1.03 in-sample, 0.86 out-of-sample.

After 25 bps of trading costs: 18.2% a year. EDGE OVER RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	8.9%	20.9%
2000s	21.9%	-0.8%
2010s	14.9%	14.0%
2020s	26.5%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*15.9%27.2%

19996.6%21.0%

200030.2%-9.1%

200142.7%-11.9%

200221.7%-22.1%

200362.8%28.7%

200427.3%10.9%

200514.2%4.9%

200621.9%15.8%

2007-2.2%5.5%

2008-26.5%-37.0%

200952.7%26.5%

201036.6%15.1%

2011-7.1%2.1%

201227.3%16.0%

201352.3%32.4%

20149.5%13.7%

2015-13.1%1.4%

201622.0%12.0%

201726.3%21.8%

2018-11.5%-4.4%

201929.1%31.5%

202010.0%18.4%

202144.2%28.7%

2022-2.8%-18.1%

202337.6%26.3%

202437.0%25.0%

202537.2%17.9%

2026*15.8%11.8%

Losing years: 2007 (-2.2%), 2008 (-26.5%), 2011 (-7.1%), 2015 (-13.1%), 2018 (-11.5%), 2022 (-2.8%). Each cell: the strategy, then the benchmark below it. * a part year.

// THE IDEA, AS PUBLISHED

Wesley R. Gray and Tobias E. Carlisle, Quantitative Value (2012) · 2012

Drop firms flagged for earnings manipulation (accruals, M-score) or high distress risk
Take the cheapest decile by EBIT / total enterprise value
Keep the highest-quality names (franchise power + financial strength); equal weight, rebalance yearly

RUN IT YOURSELF ▸ IN THE LIBRARY

A real computation on the QuantGPT warehouse, walk-forward. A study across the whole market includes only part of the companies that later delisted from 1998 (survivors only before); a study on your own list of tickers is not affected. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-11-07 08:47 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE ONLY PARTLY IN THIS UNIVERSE (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE. PRIVACY