Executive summary
The quality factor is a defensive strategy designed to outperform during periods of heightened market volatility, lower inflation and lower growth regimes. The approach is reinforced by academic research and empirical findings.
When applied in international equity markets, quality strategies have delivered the characteristics intended: lower beta, shallower drawdowns, outperformance during market stress and defensive sector exposures. In this paper, we explore whether the quality factor can be replicated effectively in the Australian equity market.
The Australian equities market is one of the most concentrated by stock and sector. The universe is also small relative to global markets. This paper shows that these nuances present challenges when assessing factor strategy efficacy.
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