What Is Quality?

46 Pages Posted: 19 May 2017 Last revised: 30 Nov 2018

See all articles by Jason C. Hsu

Jason C. Hsu

Rayliant Global Advisors; Research Affiliates, LLC; University of California, Los Angeles - Anderson School of Business

Vitali Kalesnik

Research Affiliates LLC

Engin Kose

affiliation not provided to SSRN

Date Written: July 11, 2018

Abstract

Unlike standard factors, such as value, momentum, and size, quality lacks a commonly accepted definition. Practitioners, however, are increasingly gravitating to the style, defining quality as multi-signal for which some of the signals have been thoroughly explored in academic literature and others have received very limited attention. Among a comprehensive group of the quality categories used by practitioners, we find that capital structure, earnings stability, and growth in profitability show little evidence of premia, whereas profitability, accounting quality, payout/dilution, and investment tend to be associated with premia; further, profitability and investment-related characteristics tend to capture most of the quality-related premia.

Keywords: factor investing, multifactor, smart beta, quality factor, quality investing

Suggested Citation

Hsu, Jason C. and Kalesnik, Vitali and Kose, Engin, What Is Quality? (July 11, 2018). Financial Analysts Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2971185 or http://dx.doi.org/10.2139/ssrn.2971185

Jason C. Hsu (Contact Author)

Rayliant Global Advisors ( email )

Hong Kong

Research Affiliates, LLC ( email )

620 Newport Center Dr
Suite 900
Newport Beach, CA 92660
United States

HOME PAGE: http://www.jasonhsu.org

University of California, Los Angeles - Anderson School of Business

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Vitali Kalesnik

Research Affiliates LLC ( email )

620 Newport Center Dr
Ste 900
Newport Beach, CA 92660
United States
949-325-8717 (Phone)
949-325-8917 (Fax)

HOME PAGE: http://researchaffiliates.com/index.htm

Engin Kose

affiliation not provided to SSRN

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