The BCG growth share matrix has been used in business to rationalize where to invest and what to divest within a business portfolio. The general observation is that the switching between boxes in the matrix have increased. Businesses move more quickly to drop pets and move cash from the cash cows to stars or question marks. Investments in question marks have shorter time to prove themselves.
Finance and quants should be aware of these changes because switching within the growth share matrix will change the overall risk of the firm and thus the market beta in general and within an industry. A firm that has a high cash cow share that decides to take risks in the question mark or move to the star share will see an increase in beta. Those firms that cut the pet projected will see downside risk decline.
If these changes occur slowly, then the switch in beta will be slow; however, if there are speedier changes in the growth share matrix, the firms market beta will be more uncertain and there will be an adjustment in the cost of capital. For short-term traders, this impact will be small but for long-only longer-term investors, a changing beta that is not accounted for will have am impact on portfolio risk.
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