Analyzing the quality factor for Brazil

Authors

DOI:

https://doi.org/10.12660/rbfin.v19n3.2021.83068

Keywords:

Quality minus junk, Asset pricing models, Portfolio choice, Investment decisions

Abstract

Investments in Brazil are increasingly allocated to the stock market, at the expense of more conservative investments. Would finding higher-quality assets allow investors to increase their risk-return ratio? We analyze quality with several metrics, including the quality-minus-junk (QMJ) factor for Brazil. We find that quality companies are valued more by investors, with a higher price-to-book ratio. A portfolio of shares of higher quality shows a significant positive return over the period analyzed, adjusted for several risk factors. The sample members classified as quality companies remained within this classification over time.

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Published

2021-09-30

Issue

Vol. 19 No. 3 (2021): July-September

Section

Articles

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