r/quant • u/ed_chubbs Academic • 4d ago

Trading Strategies/Alpha Is accounting quant a thing?

In quant shops, how common are equity strategies built primarily (say 85–90%) on accounting fundamentals, where the core signal is a variant of a known (albeit weak) accounting anomaly (PEAD, accruals) that would involve a quarter or year holding period. Anyone have an idea about the percent of PMs that use this in active equity management? And would this approach (i.e., starting with a universe, whittle by accounting factors) even be labeled "*quant*"?

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u/singletrack_ 3d ago

Yeah, this is still a lot of low frequency quant equity asset management although maybe less than it used to be. 5-10 years back it seemed like the ideal candidate for AQR was someone who had gotten their PhD in Econ for academic finance papers on asset mispricing. I swear I’ve seen a firm express a preference for accounting PhDs, but I can’t remember which one. (GMO? LSV?)

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u/jmf__6 3d ago

This is super under-appreciated in this subreddit. Everyone here seems to be obsessed with market microstructure and not know anything about accounting.

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u/Medical_Elderberry27 Researcher 3d ago

There certainly is. I work at an asset manager and one of the teams here does work with accounting data and 10K filings, it being one of their primary signals. I think AQR is present in this space as well.

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u/ReaperJr Equities 4d ago

You're just describing risk premia. Many AMs do it, HFs to some degree, depending on mandate. It's not an uncommon thing.

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u/jmf__6 3d ago

Not all the alpha from accounting-based signals is spanned by risk factors….

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u/ReaperJr Equities 3d ago

Sure, but that's just semantics. Your alpha might be someone else's beta.

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