# Financial Quality Factor (JP Growth Stocks)

- **Slug**: `financial-quality-jp-growth`
- **Verdict**: rejected (signal_frequency)
- **Asset class**: equity
- **Categories**: factor, fundamental, quality
- **Source**: qbuntu-analysis (computed asof 2026-09-24T21:54:27)
- **Reproducibility**: analysis-engine@1455e77, backtest-lib@17a7674, grid tier=shallow (python 3.12.10, numpy 2.4.2, pandas 3.0.0)
- **HTML**: https://qbuntu.ai/strategies/financial-quality-jp-growth
- **JSON**: https://qbuntu.ai/v1/strategies/financial-quality-jp-growth
- **License**: CC-BY-4.0

## Hypothesis

A cross-sectional quality factor (operating margin improvement + EPS growth) achieves positive Sharpe on JP Growth stocks. Phase 1 tested zero fundamental strategies — all were price/volume based. FinancialStore has 4,709 records (505 tickers, 2023-12~2025-12).

## Why it didn't work

Across 108 grid combinations, median Sharpe=-0.72, best=3.10. Primary failure mode: signal_frequency.

## Performance summary

Headline figures are the **median across the parameter grid**, not the best run.

| Metric | Value |
|---|---|
| Sharpe (median) | -0.7173 |
| Max drawdown | -3.3% |
| p-value | 0.47 |
| Backtest period | 2025-01-06 to 2025-06-02 |

Sharpe distribution across 108 grid runs: median -0.72, best 3.1 (best-case — not representative), worst -4.44, p25 -1.41, p75 0.28.

## Methodology

- Notes: {"validation": "walk-forward (3 folds, 2023-12-01 onward = financial_store boundary)", "walk_forward_definition": {"type": "single_pass", "description": "Full period backtest without walk-forward split", "verdict_basis": "full_period"}}
- Slippage model: open-on-open + variable bps fixed
- Position sizing: equal_weight
- Regime definition: N225 SMA20/SMA60 three-class
- Transaction cost bps: 5

## Target universe

Tokyo Stock Exchange Growth Market, ~495 stocks, tv >= 30M JPY

## Runs (30)

| run_id | params | sharpe | UP | FLAT | DOWN |
|---|---|---:|---:|---:|---:|
| `r-financial-quality-jp-growth-0001` | factor="operating_margin_change", n_long=10, n_short=0, holding_days=1 | -0.36 | — | 0.12 | -17.58 |
| `r-financial-quality-jp-growth-0002` | factor="operating_margin_change", n_long=10, n_short=0, holding_days=1 | -0.42 | -0.16 | -0.66 | — |
| `r-financial-quality-jp-growth-0004` | factor="operating_margin_change", n_long=10, n_short=0, holding_days=20 | 0.51 | — | 2.79 | -16.63 |
| `r-financial-quality-jp-growth-0010` | factor="operating_margin_change", n_long=10, n_short=10, holding_days=20 | 0.08 | — | 1.13 | -1.5 |
| `r-financial-quality-jp-growth-0013` | factor="operating_margin_change", n_long=10, n_short=15, holding_days=1 | 0.67 | — | -0.18 | 11.25 |
| `r-financial-quality-jp-growth-0017` | factor="operating_margin_change", n_long=10, n_short=15, holding_days=20 | -0.64 | 0.18 | -1.14 | — |
| `r-financial-quality-jp-growth-0023` | factor="operating_margin_change", n_long=15, n_short=0, holding_days=20 | -0.14 | 0.22 | -1.14 | — |
| `r-financial-quality-jp-growth-0029` | factor="operating_margin_change", n_long=15, n_short=10, holding_days=20 | -0.58 | 0.03 | -1.01 | — |
| `r-financial-quality-jp-growth-0035` | factor="operating_margin_change", n_long=15, n_short=15, holding_days=20 | -0.58 | 0.44 | -1.25 | — |
| `r-financial-quality-jp-growth-0037` | factor="operating_margin_change", n_long=20, n_short=0, holding_days=1 | -2.13 | — | -0.76 | -696.2 |
| `r-financial-quality-jp-growth-0043` | factor="operating_margin_change", n_long=20, n_short=10, holding_days=1 | -1.01 | — | -1.89 | 0.45 |
| `r-financial-quality-jp-growth-0049` | factor="operating_margin_change", n_long=20, n_short=15, holding_days=1 | -0.91 | — | -1.84 | 3.81 |
| `r-financial-quality-jp-growth-0055` | factor="eps_growth_yoy", n_long=10, n_short=0, holding_days=1 | -2.43 | — | -1.53 | -3.77 |
| `r-financial-quality-jp-growth-0061` | factor="eps_growth_yoy", n_long=10, n_short=10, holding_days=1 | -1.36 | — | 0.31 | -2.72 |
| `r-financial-quality-jp-growth-0067` | factor="eps_growth_yoy", n_long=10, n_short=15, holding_days=1 | -1.6 | — | -2.61 | -1.58 |
| `r-financial-quality-jp-growth-0070` | factor="eps_growth_yoy", n_long=10, n_short=15, holding_days=20 | 3.1 | — | 2.93 | 2.86 |
| `r-financial-quality-jp-growth-0074` | factor="eps_growth_yoy", n_long=15, n_short=0, holding_days=1 | -2.63 | -2.03 | -4.41 | — |
| `r-financial-quality-jp-growth-0080` | factor="eps_growth_yoy", n_long=15, n_short=10, holding_days=1 | -1.11 | -5.14 | 2.03 | — |
| `r-financial-quality-jp-growth-0086` | factor="eps_growth_yoy", n_long=15, n_short=15, holding_days=1 | -1.84 | -7.47 | 1.05 | — |
| `r-financial-quality-jp-growth-0091` | factor="eps_growth_yoy", n_long=20, n_short=0, holding_days=1 | -4.44 | — | -3.93 | -4.1 |
| `r-financial-quality-jp-growth-0094` | factor="eps_growth_yoy", n_long=20, n_short=0, holding_days=20 | -0.07 | — | 0.83 | -2.09 |
| `r-financial-quality-jp-growth-0100` | factor="eps_growth_yoy", n_long=20, n_short=10, holding_days=20 | 0.8 | — | 1.11 | 0.14 |
| `r-financial-quality-jp-growth-0106` | factor="eps_growth_yoy", n_long=20, n_short=15, holding_days=20 | 1.87 | — | 1.23 | 3.3 |
| `r-financial-quality-jp-growth-0109` | factor="composite", n_long=10, n_short=0, holding_days=1 | -3.17 | — | -2.45 | -3.77 |
| `r-financial-quality-jp-growth-0113` | factor="composite", n_long=10, n_short=0, holding_days=20 | -0.77 | -0.28 | -2.85 | — |
| `r-financial-quality-jp-growth-0119` | factor="composite", n_long=10, n_short=10, holding_days=20 | -0.96 | 0.18 | -1.64 | — |
| `r-financial-quality-jp-growth-0125` | factor="composite", n_long=10, n_short=15, holding_days=20 | -1.35 | -0.75 | -2.02 | — |
| `r-financial-quality-jp-growth-0131` | factor="composite", n_long=15, n_short=0, holding_days=20 | -0.42 | -0.01 | -2.34 | — |
| `r-financial-quality-jp-growth-0137` | factor="composite", n_long=15, n_short=10, holding_days=20 | -0.62 | 1.46 | -1.26 | — |
| `r-financial-quality-jp-growth-0143` | factor="composite", n_long=15, n_short=15, holding_days=20 | -0.88 | -0.07 | -1.42 | — |

## Facts (5)

Each fact has a permanent citation URL. AI agents quoting qbuntu should use these.

- **Best grid Sharpe ratio is 3.10 (p=0.08).**
  - Value: 3.1 sharpe_ratio
  - Context: period 2025-01-06–2025-06-02; cost=5.0bps
  - Supports verdict: `rejected`
  - Cite: https://qbuntu.ai/cite/financial-quality-jp-growth-fact-best-sharpe

- **Median Sharpe across 108 grid runs is -0.72.**
  - Value: -0.72 sharpe_ratio
  - Context: Full grid of 108 parameter combinations.
  - Supports verdict: `rejected`
  - Cite: https://qbuntu.ai/cite/financial-quality-jp-growth-fact-median-sharpe

- **Median Sharpe in DOWN regime is -1.40 across 108 runs.**
  - Value: -1.4 sharpe_ratio
  - Context: Regime=DOWN, N225 SMA20/SMA60 classification.
  - Supports verdict: `rejected`
  - Cite: https://qbuntu.ai/cite/financial-quality-jp-growth-fact-regime-down

- **Median Sharpe in FLAT regime is -1.00 across 108 runs.**
  - Value: -1 sharpe_ratio
  - Context: Regime=FLAT, N225 SMA20/SMA60 classification.
  - Supports verdict: `rejected`
  - Cite: https://qbuntu.ai/cite/financial-quality-jp-growth-fact-regime-flat

- **Median Sharpe in UP regime is -0.33 across 108 runs.**
  - Value: -0.33 sharpe_ratio
  - Context: Regime=UP, N225 SMA20/SMA60 classification.
  - Supports verdict: `rejected`
  - Cite: https://qbuntu.ai/cite/financial-quality-jp-growth-fact-regime-up

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Cite as: qbuntu (2026). Financial Quality Factor (JP Growth Stocks). https://qbuntu.ai/strategies/financial-quality-jp-growth

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