OPLeverage · Other · Novy-Marx (2011)

Operating leverage

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1951Q3 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

0.60%

95% interval −0.19% to 1.29%

Next year

0.61%

95% interval −0.16% to 1.29%

Next five years

0.65%

95% interval −0.07% to 1.32%

Next quarter

−0.53%

95% interval −1.85% to 0.88%

Next year

−0.37%

95% interval −1.59% to 0.87%

Next five years

0.10%

95% interval −0.94% to 0.97%

Next quarter

0.98%

95% interval 0.06% to 1.83%

Next year

1.00%

95% interval 0.09% to 1.84%

Next five years

1.04%

95% interval 0.12% to 1.88%

Next quarter

−1.36%

95% interval −3.16% to 0.66%

Next year

−1.08%

95% interval −2.71% to 0.66%

Next five years

−0.29%

95% interval −1.59% to 0.82%

Cumulative market-adjusted return

+473% since 1951Q3 · log scale

Window	Mean	Vol.	Sharpe	t
1951Q3–2024Q4	3.03%	11.44%	0.26	2.27
2020Q1–2024Q4	3.48%	14.86%	0.23	0.52
2024Q1–2024Q4	−9.97%	7.48%	−1.33	−1.33
1951Q3–2024Q4	1.86%	11.95%	0.16	1.33
2020Q1–2024Q4	−1.20%	18.19%	−0.07	−0.15
2024Q1–2024Q4	−15.13%	16.28%	−0.93	−0.93
1951Q3–2024Q4	4.78%	14.34%	0.33	2.85
2020Q1–2024Q4	5.29%	17.78%	0.30	0.67
2024Q1–2024Q4	−2.80%	10.57%	−0.27	−0.27
1951Q3–2024Q4	0.85%	14.65%	0.06	0.50
2020Q1–2024Q4	−4.01%	24.88%	−0.16	−0.36
2024Q1–2024Q4	−26.45%	21.01%	−1.26	−1.26

Horizon	Mean	95% interval	P(neg)
Next quarter	0.104	−0.034 – 0.226	0.06
Next year	0.107	−0.027 – 0.226	0.05
Next five years	0.114	−0.013 – 0.231	0.04
Next quarter	−0.090	−0.317 – 0.146	0.72
Next year	−0.062	−0.270 – 0.145	0.69
Next five years	0.017	−0.157 – 0.162	0.40
Next quarter	0.137	0.009 – 0.257	0.02
Next year	0.139	0.012 – 0.256	0.02
Next five years	0.146	0.017 – 0.263	0.01
Next quarter	−0.188	−0.442 – 0.091	0.87
Next year	−0.149	−0.375 – 0.090	0.86
Next five years	−0.039	−0.217 – 0.112	0.66