OPLeverage · Other · Novy-Marx (2011)

Operating leverage

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

Expected return · posterior mean, % per year, averaged over the window

Next quarter

2026Q4

4.06%

95% interval 0.56% to 7.34%

Next year

2026Q4–2027Q3

4.08%

95% interval 0.57% to 7.36%

Next five years

2026Q4–2031Q3

4.12%

95% interval 0.55% to 7.45%

Forecast made 16 Sep 2026, conditioning on this portfolio's OAP returns, which end 2024Q4. The 7 quarters between then and 2026Q4 are unobserved and are integrated out under the model.

Cumulative market-adjusted return

+1,465% since 1951Q3 · log scale

Past performance, annualized

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

Forecast Sharpe ratio, annualized

Window	Mean	95% interval	P(neg)
2026Q4	0.22	−0.02 – 0.45	0.04
2026Q4–2027Q3	0.22	−0.02 – 0.45	0.04
2026Q4–2031Q3	0.22	−0.02 – 0.45	0.03
2026Q4	−0.02	−0.45 – 0.32	0.49
2026Q4–2027Q3	−<0.01	−0.39 – 0.31	0.47
2026Q4–2031Q3	0.04	−0.26 – 0.31	0.39
2026Q4	0.28	0.04 – 0.51	0.01
2026Q4–2027Q3	0.28	0.04 – 0.51	0.01
2026Q4–2031Q3	0.28	0.03 – 0.51	0.01
2026Q4	−0.16	−0.63 – 0.21	0.74
2026Q4–2027Q3	−0.13	−0.55 – 0.21	0.72
2026Q4–2031Q3	−0.06	−0.36 – 0.22	0.64