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A number of recent academic studies have concluded that gross operating profits are a useful predictor of stock price movement, when examined in the cross section of returns. In this study we focus on momentum shifts in gross operating profits in a recent earnings period: August 31, 2011 through August 31, 2013. 30 stocks similar to the UD Flyer Fund are used for the analysis. We calculate compound annual growth rates (CAGR) in gross operating profits for 4 and 8 quarter periods . The operating profit data comes from the Bloomberg Financial Database. Using cross sectional regression analysis, we regress the 4th and 8th quarter CAGRs on the stock price changes over the same respective periods. The hypothesis to be tested is that the stock price movements are directly related to gross operating profit momentum, i.e. the Sharpe coefficient is greater than 0.
Robert Dean, Trevor Collier
Primary Advisor's Department
Economics and Finance
Stander Symposium poster
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Kurcz, Erik and Staffan, Steve, "Gross Operating, Profit Momentum, and Stock Price Movement in the Cross Section of Returns in a Short Term Analysis" (2014). Stander Symposium Posters. 459.
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