asset growth anomaly
What it checks
Companies that grow their balance sheet aggressively (lots of new assets, M&A, capex spikes) tend to under-deliver the next 1-3 years — the market trusted the empire-building story too much. Bet on the boring low-growth names instead.
Mechanism
Firms with the highest YoY total-asset growth subsequently underperform low-growth peers by ~8% ann. (Cooper-Gulen-Schill 2008 RFS). Captures managerial overconfidence, empire-building, and overpayment for acquisitions that the market under-discounts at the time of expansion and corrects over 1-3 years. Anchors the FF5 CMA factor leg. Replicated internationally (Watanabe-Xu-Yao-Yu 2013 ROF; Titman-Wei-Xie 2013).
Signal rule
YoY asset-growth z over own 12Q history; long bottom quartile + 60d uptrend (boring balance sheet), short top quartile + 60d downtrend (aggressive expansion correcting).
Data dependencies
fundamentals_quarterlyQuarterly fundamentals (income, balance, cash-flow) from FMP + SEC.
Expected edge
- Paper alpha
- ~8% ann. decile spread; ~3-4% OOS
- Paper window
- 1968-2003
~8% ann. high-vs-low decile spread (1968-2003); 3-4% ann. post-publication OOS
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
qmjQualityQuality-Momentum (Asness-Frazzini-Pedersen 2019 QMJ): combine quality (gross profit / assets, ROE) with momentum — long when both are in their respective top buckets relative to their own history. The canonical cross-sectional implementation would rank across the universe; we approximate with self-relative quintiles, with fundamentals available-date lagged 45d to respect filing latency.
novy marx gross profitabilityAccounting(Revenue − COGS) / total_assets — gross profitability — predicts cross-sectional returns as strongly as book-to-market, and has been the mainstream "profitability" leg of the FF5 model since 2015. Distinct from QMJ which composites profitability+growth+safety; standalone GP is the high-beta version that explains more of the cross-section. Status: alive. Decay debate is whether the spread has narrowed (yes: 30-50%) but the sign is intact and replicable across vendors.
sloan accrualsAccountingEarnings persistence is much lower in firms with high accruals. Going long low-accrual and short high-accrual delivers ~10% annualized over 1962-1991 (Sloan 1996, Accounting Review). Richardson-Sloan-Soliman-Tuna (2005, JAE) refined the measure to a broader balance-sheet accrual definition. Status (2024 replication consensus): alive in small caps, faded in large caps post-2003.
piotroski f scoreQualityPiotroski (2000, JAR) showed that a 9-signal accounting score distinguishes winners from losers within the high-B/M (value) universe. Long F>=7 / avoid F<=2 added ~7.5% annualized over 1976-1996 inside the value tertile, and ~23% in the highest B/M decile. Modern replications through 2021 confirm the score still differentiates forward returns even without the value gate; works especially well in uncertainty regimes when low-quality distressed names are marked down faster.
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