Price & Market BehaviorExtended setlive in productionNew

expected investment growth (q5)

Updated quarterlyData needs: highlong onlyshort only

2021

Hou, K., Mo, H., Xue, C., & Zhang, L. (2021). An Augmented q-Factor Model with Expected Growth. Review of Finance, 25(1), 1-41.

Read the paper →

In plain terms

Buy companies whose capital spending looks set to accelerate next year and avoid those where it is set to shrink.

How it works

Implements the expected investment growth (Eg) leg of the HMXZ q5 model: firms whose investment is expected to GROW next year earn higher returns. Eg is built by regressing the realized one-year-ahead change in investment-to-assets on Tobin's q, operating cash-flow/assets, and the change in ROE, then projecting the fitted slopes onto current predictors. Per-ticker, the cross-section is replaced with the ticker's own trailing time series, with a strict look-ahead firewall on the realized target.

Live results

0 times picked on its own · 9 times inside a blend (8 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 9 such blended picks (8 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Key metrics
A data feed this strategy reads, refreshed on its normal schedule.

Expected edge

Reported return: ~0.84%/month (t=10.3) for the Eg factor

Expected investment growth is the strongest single leg of the augmented q-factor model, earning roughly 0.84%/month in the original study.

Related families

profitability trendPrice & Market Behavior

Buy companies whose profitability has been steadily climbing quarter after quarter, and short those where it is steadily falling.

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