Quality growth momentum
factor.formula
Quality factor year-on-year growth rate:
Quality factor year-on-year increase:
The above formula provides two methods to calculate quality growth momentum, which aims to measure the magnitude of change in the quality dimension of an enterprise. The key parameters in the formula are explained as follows:
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Indicates the quality factor value of the current reporting period (t). This quality factor can select different indicators according to the actual application scenario, such as return on equity (ROE), return on total assets (ROA), gross profit margin, etc., which measure the company's profitability, debt repayment ability, operating efficiency, or comprehensive quality. This indicator can be a single quality indicator or a composite value of multiple quality indicators.
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Indicates the quality factor value n reporting periods ago, usually n is 1, which means the quality factor value of the same period of the same period last year, that is, the year before reporting period t. It should be noted that if the data frequency is quarterly, then n should be 4, which represents the data of the same quarter of the previous year.
- :
Indicates the mass growth momentum calculated in the current reporting period (t). This value can be either a growth rate or an increment.
factor.explanation
The quality growth momentum factor captures the dynamic changes in the company's quality level and assumes that the market under-reacts to such changes. Specifically, if a company's quality indicators (such as profitability, operating efficiency, etc.) are significantly improved on a year-on-year basis, then the stock may be undervalued by the market, thus presenting an investment opportunity. This factor is often used in multi-factor quantitative stock selection models and combined with other factors to improve the risk-adjusted return of the portfolio.