Analyst Consensus Coverage Weighted Momentum
factor.formula
Analyst Consensus Coverage Weighted Momentum Factor CS_it:
in:
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is the association weight between stock i and stock j based on analyst coverage, calculated as $w_{ij} = \frac{n_{i,j}}{\sum_{k=1}^{N} n_{i,k}}$, where $n_{i,j}$ represents the number of analysts covering both stock i and stock j, and $\sum_{k=1}^{N} n_{i,k}$ represents the number of all analysts covering stock i.
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is the return of stock j over the past 20 trading days, usually representing a month's (approximate) return.
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The number of all stocks in the stock pool.
factor.explanation
This factor is based on the common coverage behavior of analysts and believes that there is information correlation between the stocks covered by analysts at the same time. When the analyst's perception of a certain stock changes, this change may affect other stocks that it covers together through information spillover, thereby generating a linkage effect of returns. This factor attempts to capture the momentum effect caused by this information spillover by weighted calculation of the past returns of related stocks. Compared with momentum factors that are directly constructed using relationships such as industries and industrial chains, this factor uses the subjective perception of analysts to measure the correlation between stocks, which is more dynamic and forward-looking. Empirical studies have shown that this factor can effectively explain the predictability of cross-company returns due to information spillovers, and can be used to construct stock selection strategies.