Capital expenditure growth rate - N years (CAGR-N)
factor.formula
Capital Expenditure Growth Rate-N Years (CAGR-N):
in:
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Trailing Twelve Months Capital Expenditure. Capital expenditure refers to the long-term asset investment made by a company to maintain or expand its production capacity and business scale. The specific calculation method is: cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets - cash received from the disposal of fixed assets, intangible assets and other long-term assets.
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The 12-month rolling capital expenditures for the same period N years ago (N years before the current time point). For example, if N=2, it is the 12-month rolling capital expenditures starting from the same time point two years ago.
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Time span, in years. Common values include 2 years (N=2) and 3 years (N=3), corresponding to 24-month and 36-month comparison bases, respectively.
factor.explanation
The capital expenditure growth rate reflects the company's investment expansion in long-term assets such as fixed assets and intangible assets. Generally speaking, a higher capital expenditure growth rate may imply that the company is actively expanding its business and laying the foundation for future development, but it also needs to be analyzed in combination with the company's industry characteristics, operating conditions, etc.
Empirical studies have shown that the capital expenditure growth rate is negatively correlated with future stock returns, which may reflect overinvestment or that the market's expectations for future growth have been reflected in the stock price. In addition, the company's capital expenditure behavior will also affect the relationship between traditional fundamental factors such as market value and book-to-market ratio and stock returns, and may reduce the risk exposure of the factor.
The logic of this factor is based on the following considerations:
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Overinvestment theory: High capital expenditure growth rate may indicate that the company is overinvesting, resulting in resource misallocation and reducing future returns.
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Expected overdraft: High capital expenditure growth may mean that the market has high expectations for the company's future growth and reflects this expectation in the stock price, thereby reducing the possibility of future excess returns.
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Risk adjustment: Including capital expenditure growth in the factor portfolio can hedge the exposure to risk factors such as overinvestment to a certain extent and improve the stability of the factor portfolio.
Risk Warning: This factor is only a reference indicator in quantitative analysis and does not constitute any investment advice. Investment decisions should be based on sufficient due diligence and risk assessment.