What is quality?

Abstract

Quality” as a factor in equity investing is a collection of metrics designed to capture the indicators of higher-quality financials in companies. Quality metrics are popular in the practitioner investment community, but no standard definition for the quality factor has been agreed on. In contrast, factors such as value and size have clear and accepted definitions. Although an extensive literature is dedicated to a few specific facets of quality, certain facets used in practitioner definitions have been only minimally explored in the academic literature.