What is quality in the paper "quality minus junk" and what is the economic explanation?
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In the paper "Quality Minus Junk," quality is defined as characteristics that investors are willing to pay a higher price for, including safety, profitability, growth, and good management . Despite quality stocks having only slightly higher prices on average, they exhibit high risk-adjusted returns, leading to the profitability of a quality-minus-junk (QMJ) factor that longs high-quality stocks and shorts low-quality ones . The economic explanation lies in the fact that the price of quality fluctuates over time, with low prices of quality predicting high future returns of QMJ, and analysts' price targets and earnings forecasts often showing systematic quality-related errors . This highlights the importance of quality factors in asset pricing and the potential for investors to benefit from recognizing and investing in high-quality stocks.
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65 Citations | Quality in the paper refers to the cost of poor quality and the return on quality investments. The economic explanation involves calculating the return on resources invested in quality activities. |
| Quality in the paper refers to characteristics like profitability, growth, and safety that should command higher prices. The economic explanation is that high-quality stocks offer higher risk-adjusted returns. | |
| Quality in the paper refers to safe, profitable, growing, and well-managed stocks. The economic explanation is that investors are willing to pay more for high-quality stocks due to their risk-adjusted returns. | |
| The quality in the "quality minus junk" factor refers to the difference between high-quality and low-quality assets. This factor provides information on funding liquidity crises in portfolios. | |
Open access•Dissertation 01 Jan 2018 | Quality in the paper refers to a factor combining various dimensions like profitability and stability. The economic explanation lies in the profitability of quality minus junk, with quality and value acting as hedges. |
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