Replicating Trending Value from What Works on Wall St - not able to get same results

Hello everyone,

I’ve been trying to replicate the Trending Value strategy from “What works on Wall St” 4th ed. by Jim O’Shaughnessy. It’s a strategy I’m interested in replicating but wanted to check if I get the same results he does in the book to make sure I"m doing it right.

Basically the strategy revolves around 1) Setting a minimum inflation-adjusted market cap threshold of $200M in 2008 and adjusted for inflation for other years, 2) composite value ranking based on EV/EBITDA, P/E, P/B, P/S, P/FCF, and Shareholder yield, and 3) within the top decile of the value composite, selecting the top 25 stocks as ranked by 6 month price appreciation. The 25 stocks are rebalanced every year.

Using 2005 as an example, the book reports approx. 5300 stocks in the database passing the mktcap threshold and the Trending Value strategy gained ~32% that year vs. the broader universe gaining 7.7%.

I’ve been trying to implement this strategy by:

  1. Creating a 6 factor value ranking composite using the above mentioned factors
  2. Setting up a screen/backtest using that ranking system and the All Stocks universe
  3. Applying the rules: Mktcap > 187 AND Rank >= 90 AND Forder(“Ret6M%Chg”, #previous) <= 25

In 2005, this implementation of trending value gained 22.5%, far below the 32% reported in the book. Furthermore, only about 4000 stocks passed the market cap threshold screen vs. more than 5000 in the book.

Does anyone see any issues with what I’m doing? Has anyone been able to successfully implement the Trending Value or similar strategy in P123? Help appreciated and happy to provide more details.