Introducing Earnings Quality: A Systematic Equity Strategy Factor
Research Paper
June 1, 2016
Preview
In this Research Insight, we introduce Earnings Quality, one of the Systematic Equity Strategy (SES) Factors modeled by MSCI Equity Analytics Research. This paper finds that the Earnings Quality factor can help interpret drivers of risk and return, especially when a stock price peaks. At such turning points, weak firms may have a strong incentive to beat earnings. The Earnings Quality factor can help detect earnings management intended to boost the bottom-line, thus identifying companies of poor quality that warrant further investigation. A security's drift from high to poor earnings quality, or the negative drift of a sector or portfolio's aggregate earnings quality, might portend poor performance.
Read the full paper
Read the full paper
Provide your information for instant access to our research papers.
The content of this page is for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information. Nothing herein is intended to recommend any product, tool or service. For all references to laws, rules or regulations, please note that the information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.