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Detail for 25 Portfolios Formed on Book-to-Market and Operating Profitability

Monthly Returns:   July 1963 - May 2020
     
Annual Returns:   1964 - 2019
     
Construction:   The portfolios, which are constructed at the end of each June, are the intersections of 5 portfolios formed on the ratio of book equity to market equity (BE/ME) and 5 portfolios formed on profitability (OP). BE/ME for June of year t is the book equity for the last fiscal year end in t-1 divided by ME for December of t-1. The BE/ME breakpoints are NYSE quintiles. OP for June of year t is annual revenues minus cost of goods sold, interest expense, and selling, general, and administrative expenses divided by book equity for the last fiscal year end in t-1. The OP breakpoints are NYSE quintiles.
     
    Please be aware that some of the value-weight averages of operating profitability for deciles 1 and 10 are extreme. These are driven by extraordinary values of OP for individual firms. We have spot checked the accounting data that produce the extraordinary values and all the numbers we examined accurately reflect the data in the firm's accounting statements.
     
Stocks:   The portfolios for July of year t to June of t+1 include all NYSE, AMEX, and NASDAQ stocks for which we have ME for December of t-1 and June of t, (positive) BE for t-1, non-missing revenues data for t-1, and non-missing data for at least one of the following: cost of goods sold, selling, general and administrative expenses, or interest expense for t-1.

 

 

 

 

Copyright Kenneth R. French