Stability Selection → Earnings Stability Index (ESI)
In plant breeding, stability selection favors genotypes that perform consistently across environments rather than those that excel only under ideal conditions.
The financial equivalent is the Earnings Stability Index (ESI), which identifies companies that deliver reliable earnings growth across economic cycles.
Core Formula
ESIs = μs − λ · σs
Meaning of Terms
- ESIs – Earnings Stability Index of stock s
- μs – Average earnings growth
- σs – Volatility of earnings growth
- λ – Risk-aversion parameter
Interactive Earnings Stability Index Calculator
Interpretation:
Higher ESI values indicate stocks with strong and stable earnings growth.
Higher ESI values indicate stocks with strong and stable earnings growth.
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