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Exec Comp Pay Ratio Shift
Updated annualData needs: mediumshort only
paper
2010
Source
Frydman, C., Saks, R. E. (2010). "Executive Compensation: A New View from a Long-Term Perspective, 1936-2005." Review of Financial Studies, 23(5), 2099-2138. Also Edmans-Gabaix 2016 ARFE.
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In plain terms
When CEO pay relative to median worker pay jumps sharply, board discipline tends to weaken and the stock tends to underperform over 1-2 years.
How it works
Sharp Y/Y increases in CEO pay-ratio (or absolute CEO total comp) signal agency-conflict heat: boards lose discipline, managerial rents extract from shareholders. Returns underperform over 1-2 years.
No live results for this strategy yet. Charts appear once it has earned a top spot on at least one stock, either on its own or as part of a blend of several strategies.
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Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- SEC def14a filings
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
- Reported return
- ~3-5% over 12mo on top-decile
- Tested over
- T+1 to T+365d
Frydman-Saks 2010 / Edmans-Gabaix 2016: top-decile pay-ratio expansion ~3-5% underperformance over 12mo.
Related families
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