The DOI matches its Crossref record; 54 of the 54 references it cites were found in a registry or an index.
Quality minus junk
Open accessAbstract
We define quality as characteristics that investors should be willing to pay a higher price for. Theoretically, we provide a tractable valuation model that shows how stock prices should increase in their quality characteristics: profitability, growth, and safety. Empirically, we find that high-quality stocks do have higher prices on average but not by a large margin. Perhaps because of this puzzlingly modest impact of quality on price, high-quality stocks have high risk-adjusted returns. Indeed, a quality-minus-junk (QMJ) factor that goes long high-quality stocks and shorts low-quality stocks earns significant risk-adjusted returns in the United States and across 24 countries. The price of quality varies over time, reaching a low during the internet bubble, and a low price of quality predicts a high future return of QMJ. Analysts’ price targets and earnings forecasts imply systematic quality-related errors in return and earnings expectations.
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Cites
Common risk factors in the returns on stocks and bonds
Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754
On Persistence in Mutual Fund Performance
Carhart, M. M. (1997) · The Journal of Finance · doi:10.1111/j.1540-6261.1997.tb03808.x · Cited by 17,283
Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers
Jensen, M. C. (1986) · Cited by 17,275
The Cross‐Section of Expected Stock Returns
FAMA, E. F., & FRENCH, K. R. (1992) · The Journal of Finance · doi:10.1111/j.1540-6261.1992.tb04398.x · Cited by 17,261
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FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY
Altman, E. I. (1968) · The Journal of Finance · doi:10.1111/j.1540-6261.1968.tb00843.x · Cited by 14,888
Risk, Return, and Equilibrium: Empirical Tests
Fama, E. F., & MacBeth, J. D. (1973) · Journal of Political Economy · doi:10.1086/260061 · Cited by 14,258
A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix
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Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
JEGADEESH, N., & TITMAN, S. (1993) · The Journal of Finance · doi:10.1111/j.1540-6261.1993.tb04702.x · Cited by 11,584
Agency costs of free cash flow, corporate finance, and takeovers
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Metadata
- Authors
- Asness, C. S., Frazzini, A., & Pedersen, L. H.
- Venue
- Review of Accounting Studies
- Published
- 2018-11-05
- Volume
- 24
- Issue
- 1
- Pages
- 34-112
- ISSN
- 1380-6653 (ISSN-L)
- 1573-7136
- OpenAlex
- W3124476761
- Cited by
- 512
- References
- 54
- FWCI
- 60.20
- Type
- journal article
- Language
- en
- Open access
- hybrid
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- Asness, C. S., Frazzini, A., & Pedersen, L. H. (2019). Quality minus junk. Review of Accounting Studies. https://doi.org/10.1007/s11142-018-9470-2
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.