Issued equity growth rate
factor.formula
Use a linear regression model to fit the issued equity data for a period of time:
Calculate the growth rate of issued share capital:
in:
- :
is the annual outstanding share capital in year t.
- :
A time variable, representing the past several years. For example, when using the past five years of data, the values of $t$ are {1, 2, 3, 4, 5}.
- :
The intercept term of the linear regression model represents the size of the initial issued equity.
- :
The time trend term coefficient of the linear regression model measures the slope of the issued share capital over time. A positive value represents an increasing trend in the size of the issued share capital, while a negative value represents a decreasing trend.
- :
The residual term of the linear regression model represents the random fluctuations in issued share capital that cannot be explained by the model.
- :
Represents the historical time window used to calculate the regression and mean. For example, when using the past five years of data, T = {1, 2, 3, 4, 5}
- :
It is the arithmetic mean of the annual outstanding shares in the past T time window.
factor.explanation
This factor captures the long-term growth trend of issued equity through a linear regression model. The regression coefficient β measures the slope of equity over time and represents the rate of increase or decrease of issued equity. Dividing it by the average issued equity size over the past period of time can give a standardized growth rate indicator, which is convenient for comparison between different companies. The purpose of taking a negative sign is to make the growth rate positively correlated with the degree of company expansion, that is, a positive growth rate means that the company is actively issuing financing, and a negative growth rate means that the company may be reducing its outstanding equity.