Single Factors Summary

Single Factors Summary

Here are the main points for the one factor tests:

  • Valuation factors have a strong predictive power to achieve market outperformance.
  • The mid cap companies seem to outperform the small cap and large cap companies except for the results of the ERP5 rank.
  • The fact that a company generates a high return on invested capital does not make it a market beating investment; valuation is more important.
  • Investing in companies with a good F-score, which suggests improving fundamentals, results in market beating returns.
  • Winners continue to win and losers continue to lose, as shown in our test using 6- and 12-months price index factors.

In the following table we show how all the single factors we tested met our criteria of being classified as a strong factor.

As a reminder, this is how we defined a strong factor:

  • The top quintile (Q1) outperforms the bottom quintile (Q5), and
  • There must be a linearity of returns among the quintiles (quintile one must outperform quintile 2 which must outperform quintile 3, up to quintile 5), and
  • The strategy must also consistently outperform the market over time. We defined consistent outperformance when the first quintile (Q1) outperformed the market portfolio 60% or more of the time.

Single factors summary 1

Single factors summary 2

Single factors summary 3

Single factors summary 4

If you only looked at the first quintile of each single factor we tested, this detailed the two best and worse strategies for each market size group of companies:


Single factors summary 5


Single factors summary 6


Single factors summary 7