Anomaly Replication Lab
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  • The zoo
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  • Multiple testing
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Educational replication, not advice. Long-short returns are decile spreads or published factor series from the Kenneth R. French Data Library and AQR, value-weighted, US equities, and gross of transaction and shorting costs — which for high-turnover signals like short-term reversal is the whole story. Reproducing a premium in-sample is not evidence it will persist. Past performance does not predict future results.

© 2026 Austin Levenberg. All rights reserved. This site’s code, design, written analysis, and computed results are not licensed for reuse or redistribution — terms of use · privacy.

Data: Kenneth R. French Data Library, AQR Capital Management public data sets.

Part of austinlev.dev — four research tools, and a note on where this is headed.

← the zoo
ValueGone

Value (cash-flow-to-price)

High cash-flow yield predicts higher returns.

Lakonishok, Shleifer & Vishny · Journal of Finance · published 1994 · original sample 1963–1990 (reported ≈ +7.6%/yr, t ≈ 3)

How our version differs from the paper. LSV used a two-way sort (also controlling for past growth) and annual rebalancing; our univariate value-weighted decile spread is smaller. The decay figure compares our replication in-sample to our replication after publication, so it isn’t affected by this — but the level gap between “reported” and “our replication” partly is.
Our replication
+2.9%
1951–2026, per year
Full-sample t
2.1
Sharpe 0.26
Post-publication
-0.1%
since 1995, t = 0.0
Decay
101%
of the premium is gone

The whole history

Growth of $1 in the long-short strategy, gross of trading and shorting costs. The dashed line marks the year the paper was published — everything to its right is out-of-sample.

$1 in the long-short strategy, gross of costs. Grey = the sample the paper had; blue = everything since.

Before and after publication

The comparison the site is built around.

WindowReturn/yrVolSharpet-statMax DD
Paper's sample (1963–1990)+5.4%14.5%0.442.2-32%
After publication (1995–2026)-1.5%16.9%0.00−0.0-83%
Full sample (1951–2026)+2.9%15.0%0.262.1-83%

Against the factor models

Is there a risk-adjusted alpha left once you control for the standard factors? Alpha is annualized; t-stats use Newey–West standard errors.

ModelAlpha/yrAlpha tR²Biggest loadings
CAPM (market only)+3.8%1.70.01Mkt-RF -0.12
Fama–French 3-factor-1.4%−1.00.55HML +1.08, SMB +0.27, Mkt-RF -0.02
Fama–French 5-factor-2.8%−2.00.57HML +1.03, SMB +0.34, RMW +0.34
FF5 + momentum-2.8%−2.10.57HML +1.03, SMB +0.34, RMW +0.34

Rolling performance

Trailing 3-year Sharpe ratio. Long stretches below zero are common.

By decade

1950s+8.5%/yrSharpe 0.79
1960s+5.5%/yrSharpe 0.43
1970s+12.8%/yrSharpe 0.77
1980s+4.7%/yrSharpe 0.34
1990s-3.1%/yrSharpe -0.28
2000s+13.9%/yrSharpe 0.83
2010s-6.8%/yrSharpe -0.53
2020s-6.7%/yrSharpe -0.28

The risk explanation

LSV explicitly argued there is no extra risk — value just wins. Later work says cash-flow-based value loads on the same distress factor.

The behavioral explanation

The paper that named the behavioral case: 'contrarian' strategies work because investors extrapolate past growth too far.

Why it might have decayed

Cash-flow value held up better than book-to-market through the 2010s but still soft. Accounting definitions of cash flow have drifted since 1994.

Long-short = top-decile minus bottom-decile of stocks univariately sorted on the characteristic. Value-weighted, US equities, monthly, gross of transaction and shorting costs. The original-paper figures are approximate and annualized for comparison.