OperProfRD · Profitability · Ball et al. (2016)

Operating profitability R&D adjusted

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1963Q3 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

2.19%

95% interval 1.35% to 2.89%

Next year

2.03%

95% interval 1.22% to 2.80%

Next five years

1.55%

95% interval 0.52% to 2.55%

Next quarter

2.19%

95% interval 1.35% to 2.89%

Next year

2.02%

95% interval 1.23% to 2.80%

Next five years

1.55%

95% interval 0.53% to 2.54%

Next quarter

2.69%

95% interval 1.64% to 3.57%

Next year

2.48%

95% interval 1.46% to 3.46%

Next five years

1.87%

95% interval 0.56% to 3.17%

Next quarter

2.70%

95% interval 1.67% to 3.57%

Next year

2.49%

95% interval 1.48% to 3.47%

Next five years

1.88%

95% interval 0.55% to 3.18%

Cumulative market-adjusted return

+4,386% since 1963Q3 · log scale

Window	Mean	Vol.	Sharpe	t
1963Q3–2024Q4	6.97%	12.23%	0.57	4.47
2020Q1–2024Q4	14.29%	17.48%	0.82	1.83
2024Q1–2024Q4	19.84%	18.97%	1.05	1.05
1963Q3–2024Q4	6.97%	12.23%	0.57	4.47
2020Q1–2024Q4	14.29%	17.48%	0.82	1.83
2024Q1–2024Q4	19.84%	18.97%	1.05	1.05
1963Q3–2024Q4	8.51%	15.81%	0.54	4.22
2020Q1–2024Q4	14.03%	23.19%	0.60	1.35
2024Q1–2024Q4	31.74%	32.30%	0.98	0.98
1963Q3–2024Q4	8.51%	15.81%	0.54	4.22
2020Q1–2024Q4	14.03%	23.19%	0.60	1.35
2024Q1–2024Q4	31.74%	32.30%	0.98	0.98

Horizon	Mean	95% interval
Next quarter	0.364	0.220 – 0.481
Next year	0.335	0.200 – 0.462
Next five years	0.254	0.085 – 0.416
Next quarter	0.363	0.222 – 0.481
Next year	0.334	0.201 – 0.462
Next five years	0.253	0.086 – 0.417
Next quarter	0.345	0.208 – 0.461
Next year	0.316	0.186 – 0.444
Next five years	0.237	0.071 – 0.402
Next quarter	0.346	0.211 – 0.460
Next year	0.317	0.187 – 0.442
Next five years	0.238	0.070 – 0.401