Growth factor

The growth factor selects stocks with elevated historical or expected growth in fundamentals — earnings per share, sales, book value, or some composite. Growth-tilted portfolios tend to own companies trading at higher multiples than the market because investors are willing to pay up for the projected trajectory.

Growth is typically described as the empirical opposite of value: where value buys cheap and waits for a re-rating, growth buys the trajectory and is willing to pay for it. Academic factor research has historically struggled to identify a pure growth premium — meaning excess returns that can't be explained by other factors (size, market beta, or the absence of the value premium). Much of what's popularly called "growth investing" is better described as an anti-value tilt.

Growth strategies shine in regimes where high-multiple companies deliver the expected growth and their multiples hold or expand. They suffer when rates rise sharply (expensive companies with distant cash flows re-price downward), when expected growth disappoints, or when a long-running leadership cohort rotates out.