hou xue zhang q factor
What it checks
Rank companies on two things: how little they spend on capex relative to assets (efficient investment) and how high their return on equity is. Top 25% combos go long, bottom 25% go short. Hold 3-12 months.
Mechanism
q-factor 2-component composite: low investment (|capex|/total_assets) and high profitability (ROE = net_income/total_equity). HXZ 2015 document the q-factor outperforms Fama-French 4-factor on most anomaly tests; the long top-quintile / short bottom-quintile pair earns +4-5%/yr post-1990.
Signal rule
Mean of {(1 - capex/TA pctl), ROE pctl} >= 0.75 (LONG) or <= 0.25 (SHORT) over trailing 8 quarters (T+1 after 45d filing lag) -> hold 63/126/252 trading days.Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
income_statementsWorker data table — see services/worker schema.
balance_sheetsWorker data table — see services/worker schema.
cash_flowsWorker data table — see services/worker schema.
Expected edge
- Paper alpha
- +4-5%/yr
- Paper window
- T+45d to T+252d
+4-5%/yr on long-short q-factor pair (HXZ 2015).
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
quality minus junkQualityComposite QMJ score combining profitability (GP/A), growth (4Q YoY GP), safety (-D/E), and payout (|div|/NI), each ranked over trailing 8 quarters. Long top-quintile (composite percentile >= 0.75), short bottom-quintile (<= 0.25). AFP 2019 document +4-6% annual alpha on the long-short pair. Distinct from the existing #21 qmj which uses only GP/A + 12m momentum.
asset growth anomalyQualityFirms 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).
cash operating profitabilityQualityDistinct from QMJ's "profitability" leg: cash-based operating profit (operating income + depreciation − ΔAR − ΔInventory + ΔAP) / book equity is a stronger single-name predictor than Novy-Marx's gross profitability or GAAP operating profitability. The intuition: cash-OP backs out accruals that the market discounts (or that fade) — what's left is the cash component of operating profit, which earnings persistence work shows is most repeatable.
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.
Explore hou xue zhang q factor on alphactor.ai
See which tickers this family is currently firing on, with live signals and rankings.