CBOperProf
Long high CBOperProf · rebalanced monthly · cap-weighted long-short
Revenue (revt) minus cost (cogs) - (administrative expenses (xsga) - R&D expenses (xrd)) minus annual change in receivables (rect), annual change in investment (invt) and annual change in prepaid expenses, plus annual change in current deferred revenue (drc), long-term deferred revenue (drlt), accounts payable (ap) and accrued expenses (xacc), all divided by total assets (at) in year t. Replace all variables in the numerator with 0 if they are missing. Exclude if share code is greater 11, market value of equity, BM or total assets are missing, or if SIC code between 6000 and 6999.
Profitability/quality: more profitable firms have historically delivered higher subsequent returns than less profitable ones.
Growth of $1 — long-short
All stocks · cap-weighted · 331 months
The bottom-bucket figures are that basket’s ownreturn (a long position in what the strategy shorts) — not the short side’s P&L. Long-short return = long leg − bottom bucket, so a falling bottom bucket widens the spread.
’00–’12 · ’13–’18 · ’19–’26windows
Recomputes the split Sharpes and test alpha. Full Sharpe, ann. return, max drawdown and OAP correlation span the whole sample and don’t change.
Source study
Ball et al. · 2016
Journal of Financial Economics
Worked example
Live inputs for a real holding
| Input | Value |
|---|
signed_value is the internal ranking value; only its cross-sectional rank matters. $-vs-$M unit mix means ratio magnitudes carry a constant offset and are not comparable to textbook levels.
Replication
How closely this rebuild tracks the published research
Correlation compares an equal-weighted rebuild of this signal against Open Source Asset Pricing’s published monthly long-short series. Above ~0.6 is a strong match; 0.35–0.6 is moderate, usually reflecting data-vintage and universe differences rather than a different signal.
Style tilt
Size × value map of the long leg
Share of long-leg capital by market cap × book-to-market, using terciles of the 3,283-name universe at July 2026. Rows: Large ≥ $5.2B, Small < $819M. Columns: Value ≥ 0.62, Growth < 0.34 B/M. The dot marks the capital-weighted centroid of the book — 100% toward Large, 85% toward Growth. Hypothetical holdings — descriptive, not realized P&L.
Capital-weighted centroid of the long leg, December 1998 → July 2026; the right-hand end is the same value as the box’s dot. 214 names now. Hypothetical holdings — descriptive, not P&L.
Since publication
Did the edge survive the paper coming out?
Split at January of the year after the factor was published. The post-publication stretch IS genuinely out-of-sample relative to the original study -- the predictor was public by then -- so it speaks to whether the effect survived being known. Nothing is fitted here, so this is performance SINCE PUBLICATION, not validation of a model. Note the 'pre' side is our data before publication (our panel starts ~1999), NOT the study's original in-sample period, which usually ran decades earlier; a decay figure compares before-vs-after within our sample and is not a comparison against the published result.
Derivatives risk (Rule 18f-4)
Relative VaR against the designated reference portfolio — as implemented here
This assessment describes the research long-short construction — long the top bucket, short the bottom.
This fund does NOT qualify for the limited-derivatives-user exception (100% of net assets vs <= 10% of net assets), so the relative VaR test governs. Note the inversion: a dollar-neutral long-short book suppresses the market risk the VaR ratio measures and so tends to pass it, while being barred from the exception by construction — what disqualifies the strategy is the exposure threshold, not the risk limit.
Rule 18f-4(c)(4): a fund whose derivatives exposure (gross notional, including the value of assets sold short) is <= 10% of net assets is excepted from the VaR tests and the full derivatives risk management program.
No confidence interval: this follows from portfolio construction, not from an estimate.
Rule 18f-4(c)(2)(i): fund VaR at 99% over 20 trading days must not exceed 200% of the designated reference portfolio's VaR on the same basis.
Within the limit as implementedhistorical method · 331 monthly observations · about 3.3 in the 99% tail · paired percentile bootstrap over months
The estimators differ materially in value but agree on the verdict. Historical and Gaussian fund VaR differ by 23%; both still land on the same side of the 2x limit.
Engineering approximation of SEC Rule 18f-4 for research display. Not a compliance opinion and not a determination that any fund is compliant. Hypothetical model portfolio, not a registered fund.
Consistency across eras
Is this record broadly durable, or one regime?
3-year rolling windows, stepping 1 year (26 windows). Dispersion is the spread of window Sharpes — higher means the record depends more on which era you look at.
Rules-based factors fit no parameters, so these windows are not out-of-sample tests and do not validate a fitted model. They show whether the factor's record is consistent across eras or driven by one regime.
Returns
Long-short is the research line; the long leg is what a long-only fund could hold
| Period | Long-short | Long leg |
|---|---|---|
| 1 yearcum. | 19.8% | 28.6% |
| 3 yearsp.a. | 21.3% | 27.7% |
| 5 yearsp.a. | 26.2% | 18.4% |
| 10 yearsp.a. | 18.8% | 21.8% |
| Since inceptionp.a. | 13.2% | 14.1% |
| Year | Long-short | Long leg |
|---|---|---|
| 20267 mo | 5.1% | 10.4% |
| 2025 | 8.2% | 25.1% |
| 2024 | 36.5% | 42.0% |
| 2023 | 28.8% | 57.2% |
| 2022 | 23.9% | -31.5% |
| 2021 | 42.0% | 30.5% |
| 2020 | -4.0% | 42.0% |
| 2019 | 2.0% | 32.6% |
| 2018 | 24.3% | 2.4% |
| 2017 | 28.6% | 34.2% |
| 2016 | 4.1% | 5.3% |
| 2015 | 17.8% | 9.9% |
| 2014 | 17.6% | 17.8% |
| 2013 | 9.5% | 43.8% |
| 2012 | -3.9% | 15.7% |
| 2011 | 11.7% | 2.6% |
| 2010 | -12.7% | 10.3% |
| 2009 | -15.3% | 37.0% |
| 2008 | 54.5% | -27.9% |
| 2007 | 1.8% | 11.4% |
| 2006 | 0.2% | 11.1% |
| 2005 | 2.5% | 6.9% |
| 2004 | -14.0% | 4.4% |
| 2003 | -19.0% | 22.0% |
| 2002 | 38.7% | -20.2% |
| 2001 | 31.4% | -13.4% |
| 2000 | 136.8% | 16.6% |
| 1999 | -9.5% | 54.4% |
Long-short is the research line (long the top bucket, short the bottom); the long leg alone is what a long-only fund could actually hold. Trailing figures run through July 2026: 1 year is a plain cumulative 12-month return (cum.), 3 years and longer are annualised (p.a.). Years marked with a month count are partial. These match the fact sheet’s tables by construction. Hypothetical backtest, gross of the placeholder expense ratio and trading costs — not investor results.
Methodology
Signal computed monthly from Sharadar point-in-time data, signed so higher = higher expected return. Stocks sorted into deciles within a liquid common-stock universe (price > $5, market-cap floor). The virtual ETF is long the top bucket, short the bottom, cap-weighted, rebalanced monthly. FF5 alpha regresses the long-short on the Fama-French 5 factors. OAP corr 0.42 compares an equal-weighted version to Open Source Asset Pricing’s published series.
Hypothetical research backtest. Not an offer, recommendation, or investment advice.