Definition
The quality factor invests in companies with characteristics like high profitability (ROE), earnings stability, low debt, and strong competitive positions. Quality stocks tend to outperform over time, especially in down markets, as they're more resilient to economic stress. Quality is a well-documented factor alongside value and momentum.
Example
A quality factor ETF overweights stocks with high ROE, stable earnings growth, and low leverage relative to peers.
FAQ
What is Quality Factor?
A factor strategy targeting financially strong, profitable companies.
Why is Quality Factor important?
Quality Factor helps investors evaluate investment strategies and make more informed decisions.