Investment Returns to Quality in Developed Markets

10 Pages Posted: 7 Nov 2014

Date Written: October 30, 2014


Quality, defined as companies with high returns on capital, good quality of earnings, and low leverage, has substantial superior investment return predictability. Quality firms as selected by our strategy generate substantially superior returns even though they are significantly larger than the average company in terms of market capitalization. Further, returns from quality are higher than the benchmark even though risk as measured by standard deviations as well maximum drawdowns is lower than the market.

Keywords: Quality, Equities, Stocks, Finance, Returns on Capital, Quality of Earnings, Free Cash Flow, Leverage, Debt, Drawdown, Low Risk

JEL Classification: G10, G11, G12, G14, C22

Suggested Citation

Ramraika, CFA, Baijnath and Trivedi, Prashant, Investment Returns to Quality in Developed Markets (October 30, 2014). Available at SSRN: or

Baijnath Ramraika, CFA (Contact Author)

Multi-Act EquiGlobe Limited ( email )

SF 08, Second Floor
The Pod, Vivea Business Park
Moka, Mauritius 81406
2304609893 (Phone)
2304340362 (Fax)


Prashant Trivedi

MAEG ( email )

3rd Flr, Trade Centre Bldg
North Main Road, Koregaon Park
Pune, Maharashtra 411001

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