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Academic audit

Failedequity XS value

Value (Book-to-Market) Factor

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation
Gate 1
Survivorship-free
free
clean panel
Gate 2
Placebo ≥ P95
not run
Eliminated here
Gate 3
Cost-aware net
RF -0.72
net-negative after costs
Failed
Worst 12-month leg (RF)-0.87
−1.00 floor0
Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.
Rejected at the cost gate — the net edge turns negative once modelled costs are applied.

The classic value factor sorts stocks on book-to-market and goes long the cheapest names against the most expensive (Fama-French HML). This page reports our own out-of-sample retest of that sort, not the original paper's result.

What we found

In naive decile form the value premium was absent to negative over our 2005-2026 sample: the long/short leg finished net-negative, with a risk-adjusted RF of -0.72 and a worst-year RF of -0.87. The effect that Fama and French documented did not reappear in this window under a simple, mechanical book-to-market sort. We did not carry this leg forward as a diversifying building block, because it did not clear the basic requirement of being net-positive after costs.

How we tested it
2005–2026 test windowmodelled liquidity-aware costssurvivorship free
  • Survivorship-free 1077-name US common-stock panel, 2005-2026. Realistic modelled costs.
  • Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)
Source: Fama & French (1992), "The Cross-Section of Expected Stock Returns" (HML / book-to-market)
Read the paper ↗
← The Academic Audit — all 54 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.