Intraday return skewness
factor.formula
Intraday Return Skewness (IRSkew):
Intraday Realized Variance (RV_ar):
in:
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is the logarithmic return of stock i in the jth time interval. The time interval can be 1 minute, 5 minutes, or other high-frequency sampling frequency. For example, if the 1-minute frequency is used, r<sub>ij</sub> represents the logarithmic return of stock i in the jth minute, calculated as ln(price<sub>j</sub>/price<sub>j-1</sub>).
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is the average logarithmic return of stock i in all time intervals on the day, that is, $\overline{r_i} = \frac{1}{N} \sum_{j=1}^{N} r_{ij}$.
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The total number of intraday time intervals used to calculate the intraday return skewness. For example, if a 1-minute frequency is used and the trading time per day is 240 minutes, then N=240. When backtesting or applying strategies, the average factor value over the past period is usually used as the current factor value. For example, if stocks are selected at a monthly frequency, the intraday return skewness of the past 20 trading days can be calculated and the average value can be taken as the factor value for the current month.
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is the realized variance of stock i on the current day, which is a measure of the sum of squares of intraday returns and is used to measure the magnitude of intraday price fluctuations. The formula is $RV_{ar_i} = \sum_{j=1}^{N} (r_{ij} - \overline{r_i})^2$.
factor.explanation
The intraday return skewness is calculated by dividing the third-order central moment of the intraday return by the 1.5th power of the intraday return variance to normalize it, thereby characterizing the degree of inclination of the intraday return distribution. A positive skewness indicates that the right tail of the return distribution is longer, and the possibility of larger positive returns is higher; a negative skewness indicates that the left tail of the return distribution is longer, and the possibility of larger negative returns is higher. In quantitative trading, this factor is often used in high-frequency strategies or short-term strategies, and stocks with low intraday return skewness are considered to have greater buying potential. The reason may be that low skewness implies that there is a longer tail on the left side of the return distribution, that is, the probability of negative extreme returns is higher, which may indicate a reversal of stock prices or a repair after an oversold. It should be noted that this factor should not be used alone, but should be analyzed in combination with other factors.