// STUDY RESULT · 1998-01 TO 2026-09

Inspired by Novy-Marx: Profitable Value

TRADE-OFF

Combine a conventional value screen with gross profitability, because profitable firms can be attractive even when their book-to-market alone does not identify them. The combination avoids treating all cheap firms as equivalent.

How this run differs from the source: An ROE floor, then a P/B rank; the paper ranks gross profits over assets plus book-to-market, long-short.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	16.1%	9.3%
Sharpe ratio	0.76	0.66
Max drawdown	-58.7%	-50.9%

// GROWTH OF $1, LOG SCALE

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

Out-of-sample (from the split): CAGR 12.4% against 14.0% for the benchmark; Sharpe 0.86 in-sample, 0.61 out-of-sample.

After 25 bps of trading costs: 14.7% a year. WITHIN RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	1.2%	20.9%
2000s	23.1%	-0.8%
2010s	12.0%	14.0%
2020s	16.9%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*4.6%27.2%

19997.0%21.0%

200040.3%-9.1%

200150.3%-11.9%

20028.2%-22.1%

200377.3%28.7%

200441.1%10.9%

200517.1%4.9%

200612.7%15.8%

20074.2%5.5%

2008-38.3%-37.0%

200951.8%26.5%

201041.1%15.1%

2011-11.5%2.1%

201221.6%16.0%

201342.3%32.4%

20147.3%13.7%

2015-14.6%1.4%

201623.0%12.0%

201729.0%21.8%

2018-13.6%-4.4%

201920.5%31.5%

20204.8%18.4%

202131.3%28.7%

2022-8.8%-18.1%

202332.0%26.3%

202416.8%25.0%

202535.1%17.9%

2026*3.3%11.8%

Losing years: 2008 (-38.3%), 2011 (-11.5%), 2015 (-14.6%), 2018 (-13.6%), 2022 (-8.8%). Each cell: the strategy, then the benchmark below it. * a part year.

// THE IDEA, AS PUBLISHED

Robert Novy-Marx (2013), Journal of Financial Economics · 2013

Calculate book-to-market using accounting book equity and market capitalization.
Calculate gross profitability as gross profits divided by total assets.
Select stocks that are relatively high in book-to-market and gross profitability, then rebalance on a stated schedule.

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 2026-11-09 19:21 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