The Consistency of Returns for Low Price to Cash Flow Companies as Compared to High Price to Cash Flow Companies

The study which was described in the preceding section, Contrarian Investment, Extrapolation and Risk, also examined the consistency of investment returns for low price to cash flow companies as compared to high price to cash flow companies over 1-year, 3-year and 5-year holding periods from 1968 through 1990. The investment returns for the companies in the high price to cash flow category, which comprised the returns for the companies in the highest two deciles of companies which had been ranked on price to cash flow, were subtracted from the investment returns of the low price to cash flow companies, which comprised the bottom two deciles of the price to cash flow ranking. Table 24 shows the results of the study.

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