Realized capital surplus ratio
factor.formula
Reference Price calculation formula:
Realized Capital Gain Overhang Calculation Formula:
in:
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It is the turnover rate of the stock in week t, indicating the level of stock trading activity during that week. The larger the value, the more frequent the turnover, that is, a larger proportion of stocks are traded.
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is the closing price at the end of the tth week, representing the market price of the stock at that point in time.
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The length of the lookback time window is set here to the number of weeks in the past five years, that is, T=260, which means that the transaction data of the past five years are taken into account when calculating the reference price.
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is the normalization coefficient, which ensures that the sum of the weights of the reference prices is 1, making the reference prices of different stocks comparable. The specific calculation method is $k = \sum_{n=1}^{T} \left(V_{t-n} \prod_{r=1}^{n-1} (1 - V_{t-n+r})\right)$
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It is the reference price of the tth week. Its essence is a theoretical price calculated by weighted average of historical stock prices. The weight is determined by turnover rate, which aims to simulate the average cost of investors' holdings.
factor.explanation
The core logic of the realized capital surplus ratio (RCGO) is to use the historical turnover rate to weight past stock prices and construct a reference price (RP), which can be regarded as the average cost of investors' holdings. RCGO measures the extent of investors' average profit and loss by calculating the difference between the current price and the reference price. Specifically, a positive RCGO value indicates that the current stock price is lower than the average cost of investors. At this time, if investors tend to take profits, the probability of a stock price rebound may be higher; conversely, a negative RCGO value indicates that the current stock price is higher than the average cost of investors, and investors may tend to sell at this time. Therefore, RCGO can be used as an indicator to measure the degree to which a stock is undervalued or overvalued, especially in the framework of behavioral finance, where the investor "disposition effect" may cause stock prices to deviate from their intrinsic value. This factor assumes that the market is not completely efficient, and investor behavior affects prices, and RCGO attempts to capture the impact of such behavior on stock prices.