Seller impact costs
factor.formula
Estimate seller shock costs using a linear regression model:
in:
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The seller impact cost coefficient indicates the negative impact of the unit active selling amount on the stock return. The larger the absolute value of this coefficient, the greater the impact of seller transactions on prices and the worse the liquidity.
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The buyer impact cost coefficient indicates the positive impact of the unit active purchase amount on the stock return rate. The larger the absolute value of this coefficient, the greater the impact of buyer transactions on prices.
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The amount of active selling of stock i in time interval t. Active selling refers to the amount of selling orders executed at the current market buyer's quote, which represents the seller's willingness to execute the transaction immediately.
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The active buying amount of stock i in time interval t. Active buying refers to the amount of buy orders traded at the current market seller's price, which represents the buyer's willingness to trade immediately.
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The return of stock i in time interval t.
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The intercept term of the regression model.
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The residual term of the regression model represents the part that cannot be explained by the model.
factor.explanation
The seller impact cost factor captures the immediate negative impact of active selling volume on stock returns through a linear regression model, thereby measuring market liquidity. This factor not only reflects the liquidity level of stocks under seller pressure, but also reflects the behavioral bias of investors when facing losses. Empirical research shows that this factor has a strong explanatory power in cross-sectional return prediction and is better than buyer impact costs, indicating that seller trading behavior has a more significant impact on market prices.