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![Quant_Kurtis Avatar](https://lunarcrush.com/gi/w:24/cr:twitter::837037741636399104.png) Kurtis The Quant [@Quant_Kurtis](/creator/twitter/Quant_Kurtis) on x 4480 followers
Created: 2025-07-23 15:44:08 UTC

How does stock-based compensation affect share price returns? The results over the past XX years are conflicting.

The latest release of this Portfolio123 factor (based on FactSet data) is as follows: 

✔️ stock-based compensation TTM (income statement) / EV
 
I ran a factor backtest from 2010 with this factor in the S&P XXX and the Russell 2000. 
 
▶️ Firms in the S&P XXX index have almost X% higher annual return than the average stock in the index

▶️But firms in the Russell 2000 index have -XXXX% annual returns

Why is this? 

❓ Are smaller firms taking too much profit which harms future growth? 

❓Or are they making high risk bets hoping for a lottery-like payoff with the share price and their own compensation? 

❓Or could this be buying low momentum stocks where compensation seems high because Enterprise Value is falling? 
 
An interesting puzzle. Has anyone looked into this before or have a relevant white paper they can point to?

![](https://pbs.twimg.com/media/GwjZr9Ca4AE7oFU.jpg)

XXXXX engagements

![Engagements Line Chart](https://lunarcrush.com/gi/w:600/p:tweet::1948046478414610851/c:line.svg)

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