West Loop Financial LLCExploring The Profitability Factor – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 Exploring The Profitability Factor https://www.westloopfinancial.com/2015/06/22/exploring-the-profitability-factor/ https://www.westloopfinancial.com/2015/06/22/exploring-the-profitability-factor/#respond Mon, 22 Jun 2015 09:00:07 +0000 http://evolvemypractice.com/?p=2028 A June 2012 study authored by University of Rochester professor Robert Novy-Marx, “The Other Side of Value: The Gross Profitability Premium,” not only provided investors with new insights into the cross section of stocks returns, but also led to the development of new factor models that incorporate a profitability factor. Novy-Marx’s Findings Before unpacking a...

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]]> A June 2012 study authored by University of Rochester professor Robert Novy-Marx, “The Other Side of Value: The Gross Profitability Premium,” not only provided investors with new insights into the cross section of stocks returns, but also led to the development of new factor models that incorporate a profitability factor.

Novy-Marx’s Findings
Before unpacking a more recent paper with new insights into how accruals and cash flows can impact profitability, I think it’s important to summarize some of Novy-Marx’s more fundamental findings on this premium:

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