// STUDY RESULT · 1998-01 TO 2026-09

Inspired by Greenblatt: Magic Formula

TRADE-OFF

Rank the market on cheapness (earnings yield) plus quality (return on capital); buy the best combined ranks mechanically.

How this run differs from the source: Ranks on earnings yield (net income over market cap) with an ROE floor; Greenblatt sums ranks of EBIT/EV and return on capital.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	15.0%	9.3%
Sharpe ratio	0.70	0.66
Max drawdown	-61.4%	-50.9%

// GROWTH OF $1, LOG SCALE

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

Out-of-sample (from the split): CAGR 11.4% against 14.0% for the benchmark; Sharpe 0.79 in-sample, 0.58 out-of-sample.

After 25 bps of trading costs: 13.8% a year. WITHIN RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	1.6%	20.9%
2000s	22.0%	-0.8%
2010s	11.6%	14.0%
2020s	14.5%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*-0.2%27.2%

199913.2%21.0%

200029.3%-9.1%

200155.7%-11.9%

200210.9%-22.1%

200380.4%28.7%

200445.3%10.9%

200510.1%4.9%

200617.5%15.8%

20077.0%5.5%

2008-43.7%-37.0%

200948.4%26.5%

201038.3%15.1%

2011-22.5%2.1%

201218.4%16.0%

201348.6%32.4%

201412.1%13.7%

2015-12.2%1.4%

201638.2%12.0%

201731.2%21.8%

2018-13.8%-4.4%

201912.3%31.5%

2020-0.8%18.4%

202128.9%28.7%

2022-16.1%-18.1%

202335.0%26.3%

202422.8%25.0%

202527.4%17.9%

2026*-0.5%11.8%

Losing years: 1998 (-0.2%), 2008 (-43.7%), 2011 (-22.5%), 2015 (-12.2%), 2018 (-13.8%), 2020 (-0.8%), 2022 (-16.1%), 2026 (-0.5%). Each cell: the strategy, then the benchmark below it. * a part year.

// THE IDEA, AS PUBLISHED

Joel Greenblatt, 'The Little Book That Beats the Market' (2005) · 2005

Earnings yield = EBIT / EV; return on capital = EBIT / (net working capital + net fixed assets)
Exclude utilities, financials and foreign stocks; apply a market-cap floor
Sum the two ranks; buy the top 20-30 in batches; hold each about one year

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 2026-11-08 13:53 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