An Empirical Analysis: Revisiting Earnings Acceleration as a Source of Diversifying Excess Returns
Earnings acceleration—a change in the velocity of growth—indicates something is affecting a company’s business prospects. Identifying that force has been a cornerstone of our growth investment process for more than 30 years. Our Global Growth Equity Desk expanded the scope of analysis to determine the continued viability of earnings acceleration as a potential source of significant, durable and diversifying excess returns. Does the data still stand up? Research Highlights: • Percent of companies with accelerating earnings over time • Distribution of accelerating companies by sector • Excess returns over MSCI ACWI Index • Excess returns by region and decile • Correlation of an earnings acceleration portfolio to three equity factors: momentum, value and size
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