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Quantitative Finance · Glossary

What is Profitability factor, quality factor?

Also known as: profitability factor · quality factor

Definition 6.2 Strategies I: Equities and Futures · Chapter 6 — Value, Quality and Low Risk

A profitability factor is long stocks of firms with high profitability (gross profits or operating profits over assets or book equity) and short those with low profitability. A quality factor generalises it to a composite of characteristics investors should pay more for, such as profitability, growth and safety.

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