High Book-to-Market Stocks
NO EDGEUse book equity relative to market capitalization to identify stocks priced cheaply relative to accounting net worth. Hold the higher book-to-market stocks rather than the lower book-to-market stocks.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 5.7% | 8.9% |
| Return per unit of risk (Sharpe) | 0.35 | 0.65 |
| Worst fall (max drawdown) | -80.7% | -52.6% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 8.5% a year against 12.4% for the benchmark; Sharpe 0.30 in the training years, 0.44 after.
After 25 bps of trading costs: 4.6% a year. BELOW RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 5.5% | 19.1% |
| 2000s | 0.1% | -2.6% |
| 2010s | 5.7% | 11.6% |
| 2020s | 15.2% | 14.1% |
// THE IDEA, AS PUBLISHED
Dennis Stattman (1980), The Chicago MBA: A Journal of Selected Papers · 1980
- Obtain book equity from the latest available financial statements.
- Divide book equity by market capitalization for each eligible stock.
- Form a portfolio from the highest book-to-market group and rebalance after accounting data update.
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 20:54 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.