Customer-weighted momentum factor - weighted based on sales share
factor.formula
in:
- :
Represents the customer-weighted momentum factor for company i (supplier), calculated over the past month.
- :
Represents the total number of customers of company i (supplier).
- :
Represents the proportion of company i (supplier)'s sales from customer j to company i's total sales, reflecting the importance of customer j to supplier i. This is a weight factor, usually calculated using the latest available sales data, such as the sales data of the most recent quarter or year. The value range is [0,1]. The higher the value, the greater the influence of customer j on supplier i.
- :
Represents the return rate of customer j in the past month. Use logarithmic return rate or other common return rate calculation methods.
factor.explanation
This factor assumes that the stock price momentum of the client company will be passed on to its suppliers. When the stock price of the client company performs strongly, the market expects that its suppliers will also benefit from it, resulting in an increase in the supplier's stock price. And vice versa. This phenomenon can be explained from the perspective of "limited investor attention" and "supply chain linkage effect": when investors pay attention to the client company, they will also pay attention to its related suppliers. Therefore, the momentum of the client company will partially affect its suppliers. The idea of constructing this factor is to weight each customer according to its importance to the supplier (sales share) to obtain a comprehensive indicator that better reflects the impact of customer momentum on the supplier's stock price. By buying suppliers with high CMOM values and selling suppliers with low CMOM values, a momentum investment portfolio can be constructed.