What Works on Wall Street Composites
NO EDGEDecades of factor tests distilled: combined value composites (P/S, P/E, EV/EBITDA, P/CF, yield) beat any single ratio.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 8.5% | 8.9% |
| Return per unit of risk (Sharpe) | 0.56 | 0.65 |
| Worst fall (max drawdown) | -57.0% | -52.6% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 12.2% a year against 12.4% for the benchmark; Sharpe 0.48 in the training years, 0.69 after.
After 25 bps of trading costs: 6.4% a year. WITHIN RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 2.9% | 19.1% |
| 2000s | 6.0% | -2.6% |
| 2010s | 8.7% | 11.6% |
| 2020s | 17.8% | 14.1% |
// THE IDEA, AS PUBLISHED
James O'Shaughnessy, 'What Works on Wall Street' (1996, 4th ed. 2011) · 2011
- Value Composite: average rank on P/B, P/E, P/S, EBITDA/EV, P/CF and shareholder yield
- Take the cheapest 10% of All Stocks by the composite
- Buy the 25 with the best 6-month price gain; equal weight; rebalance annually
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 20:48 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE NOT IN THIS UNIVERSE YET (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE.