TY - JOUR
T1 - Quality investing in an Australian context
AU - Gallagher, David R.
AU - Gardner, Peter A.
AU - Schmidt, Camille H.
AU - Walter, Terry S.
N1 - Funding Information:
Research funding was provided by the Capital Markets Co-Operative Research Centre and Russell Investments.
Publisher Copyright:
© The Author(s) 2013.
PY - 2014/11/24
Y1 - 2014/11/24
N2 - This study extends an examination of Quality investing in the US to the Australian market. Specifically, a Quality score is computed as the aggregate of eight fundamental accounting metrics. An investment strategy investing in the highest (lowest) quality stock quintile, that is, Quintile 5 (1) generates an average annual Daniel, Grinblatt, Titman and Wermers (DGTW)-adjusted alpha of 6.37% (−7.98%), which is significant at the 5% level over April 2000–March 2010. A two-way segmentation based on size first, and quality second, reveals that the strong positive quality effect is primarily driven by small stocks, as the average DGTW-alpha for the top-quality tercile of small stocks is 14.02%, significant at the 5% level. Statistically significant positive DGTW-alphas are also determined for quality micro and large stocks. The quality analysis is also applied to a sample of Active Equity Mutual Funds’ stock holdings. Weak evidence of the quality return premium is detected at the fund level.
AB - This study extends an examination of Quality investing in the US to the Australian market. Specifically, a Quality score is computed as the aggregate of eight fundamental accounting metrics. An investment strategy investing in the highest (lowest) quality stock quintile, that is, Quintile 5 (1) generates an average annual Daniel, Grinblatt, Titman and Wermers (DGTW)-adjusted alpha of 6.37% (−7.98%), which is significant at the 5% level over April 2000–March 2010. A two-way segmentation based on size first, and quality second, reveals that the strong positive quality effect is primarily driven by small stocks, as the average DGTW-alpha for the top-quality tercile of small stocks is 14.02%, significant at the 5% level. Statistically significant positive DGTW-alphas are also determined for quality micro and large stocks. The quality analysis is also applied to a sample of Active Equity Mutual Funds’ stock holdings. Weak evidence of the quality return premium is detected at the fund level.
UR - http://www.scopus.com/inward/record.url?scp=84911080498&partnerID=8YFLogxK
U2 - 10.1177/0312896213501180
DO - 10.1177/0312896213501180
M3 - Article
AN - SCOPUS:84911080498
SN - 0312-8962
VL - 39
SP - 615
EP - 643
JO - Australian Journal of Management
JF - Australian Journal of Management
IS - 4
ER -