2019 Graham and Dodd Award Goes to Research Exploring the Mystery of Quality as an Equity Factor

CFA Institute, the global association of investment management professionals, announces the winners of the 2019 Graham and Dodd Awards of Excellence. Every year, a research article published in the Financial Analysts Journal, the flagship publication of CFA Institute, receives the prestigious Graham and Dodd (G&D) Award to recognize the research’s contribution to the practice of investment management. The article “What is Quality?” by Jason Hsu, Vitali Kalesnik, and Engin Kose receives the top award for 2019 for its excellent and thorough interrogation of commonly used quality factors.

Published in the Second Quarter 2019 issue of the Financial Analysts Journal, the article argues that unlike standard factors, such as value, momentum, and size, quality lacks a commonly accepted definition. The piece tests quality factors commonly used by investment firms and finds that profitability and investment-related characteristics tend to capture most of the quality-related premia. 

In addition, the G&D selection committee honored “Comparing Cost-Mitigation Techniques” by Robert Novy-Marx and Mihail Velikov with a Scroll Award for 2019. The article was originally published in the First Quarter 2019 issue of the Financial Analysts Journal. It concerns the comparison of the efficacy of three common transaction-cost-mitigation techniques on reducing the costs of an investment strategy while also maintaining a better exposure to the underlying signal used to select stocks.

“2019 was our 75th year of publishing. The quality and breadth of the 26 articles that we published in 2019 were particularly good with demonstrable impact on investment practice,” said Heidi Raubenheimer, CFA, managing editor of the Financial Analysts Journal at CFA Institute. “These two stood out from the rest for their thorough analysis of two problems from practice: the mystery of ‘quality’ as an equity factor and how to deal with trading costs without diluting the investment strategy.”

The annual Graham and Dodd Awards of Excellence include the top G&D Award to recognize the best research article and up to two Scroll Awards to acknowledge the runners-up. Winners are chosen through a two-stage selection process. First, all members of the Financial Analysts Journal Advisory Council and Editorial Board are invited to vote, producing a shortlist of peer-reviewed research articles published in Financial Analysts Journal throughout the year. Second, the G&D Awards Committee (six members selected from the CFA Institute Board of Governors, the CFA Institute Leadership Team, CFA Society Leadership, and the Financial Analysts Journal editorial team) collectively decides the award winners from the shortlist.