Designing a Gross Profit Stability Factor from TTM Data
Summary
The document asks how to define an earnings stability factor as the mean of four years of trailing-twelve-month gross profit divided by its standard deviation. It considers calculating this from daily financial-indicator data using a rolling window, and asks how to align lower-frequency financial derivative data with historical prices for ranking and backtesting.
It provides no worked implementation, backtest, or performance evidence, and leaves the data-integration question unanswered. A researcher would need to check whether daily rows repeat each reported value, how missing observations affect the rolling statistics, and whether point-in-time financial releases are used to avoid look-ahead bias. The proposed ratio also needs care when gross profit is near zero or changes sign, since its interpretation as stability may then be unreliable.
Key ideas
- The proposed factor divides mean gross profit TTM over four years by its standard deviation over the same period.
- The post asks whether a daily rolling window is an appropriate way to represent four years of observations.
- It also asks how to align lower-frequency financial data with historical stock data for ranking and backtesting.
- The document does not answer the data alignment question or provide test results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.