Profitability Retrospective: What Have We Learned?

Robert Novy-Marx and Mamdouh Medhat

No 33601, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A lot! Profitability subsumes all of “quality” investing, explaining both the performance of the strategies that industry markets and the factors that academics employ. It also has striking power pricing “defensive equity” strategies that overweight low-beta or low-volatility stocks. Profitability tilts explain all the abnormal performance of popular “alternative value” strategies, including those adjusted for “intangibles,” and half of value's post-2007 underperformance. Profitability is crucial for pricing a wide array of seemingly unrelated anomalies, yielding a more parsimonious understanding of the cross section of expected returns.

JEL-codes: G10 G12 (search for similar items in EconPapers)
Date: 2025-03
Note: AP
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