No. of Recommendations: 1
Jim, have you backtested related approaches using ROIC instead of ROE, or using both as screening criteria together? I’m curious how that changes the results, since ROIC is less affected by leverage and may better reflect the underlying economics of the business.
I also find ROIIC particularly interesting because it measures returns on newly deployed capital, though it seems tricky to screen with because small changes in invested capital make the ratio blow up.
Both sound interesting in theory, but if they don't backtest well, theory isn't worth much.
