Quality Investing in the Nordics : An empirical analysis of the QMJ factor in the Nordic countries, excluding Iceland

Abstract

This master thesis provides empirical evidence that quality investing in the Nordics, excluding Iceland, produces abnormal returns. Even though investors are willing to pay a premium for quality, the QMJ factor introduced by Asness, Frazzini, and Pedersen (2013) generates abnormal returns for Nordic countries. As we examine the QMJ factor by the individual country and the Nordics as a region, we find that the QMJ generates positive returns across all countries when having a sufficiently large investment universe. Our results suggest that high-quality firms generate higher returns than low-quality firms while being less risky, confirming the existence of the quality puzzle in the Nordics.