The other side of value
Subtitle: good growth and the gross profitability premium
By: Robert Novy-Marx
Contributors: National Bureau of Economic Research
Series: NBER working paper series -- working paper 15940; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15940.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Profitability, as measured by gross profits-to-assets, has roughly the same power as book-to-market predicting the cross-section of average returns.  Profitable firms generate significantly higher average returns than unprofitable firms, despite having, on average, lower book-to-markets and higher market capitalizations.  Controlling for profitability also dramatically increases the performance of value strategies, especially among the largest, most liquid stocks.  These results are difficult to reconcile with popular explanations of the value premium, as profitable firms are less prone to distress, have longer cashflow durations, and have lower levels of operating leverage, than unprofitable firms.  Controlling for gross profitability explains most earnings related anomalies, as well as a wide range of seemingly unrelated profitable trading strategies"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/6/2010.

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