Buyer shock costs
factor.formula
A regression model is used to estimate the buyer shock cost coefficient.
in:
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The intercept term of the regression model represents the expected return when there is no trading volume shock.
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The seller impact cost coefficient measures the negative impact of unit active selling volume on stock returns, reflecting the impact of selling pressure on stock prices.
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The buyer impact cost coefficient measures the positive impact of active buying volume per unit on stock returns, reflecting the impact of buying pressure on stock prices. This coefficient is the core measure of this factor. The larger the absolute value, the greater the impact of buying shocks on stock prices and the worse the liquidity.
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The return of stock i in time interval t is usually calculated using logarithmic return.
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The active selling volume of stock i in time interval t (for example, in yuan), which can be identified using the buy and sell order information in Tick Data or high-frequency trading data, is usually defined as the trading volume executed at the seller's quote.
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The active buying volume of stock i in time interval t (for example, in yuan), which can be identified using the buy and sell order information in Tick Data or high-frequency trading data, is usually defined as the trading volume executed at the buyer's bid price.
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The residual term of the regression model represents the return fluctuations that the model cannot explain.
factor.explanation
The buyer impact cost factor estimates the immediate impact of buy transactions on stock prices through a regression model. This factor reflects the liquidity characteristics of stocks, especially the sensitivity of stock prices under buying pressure, by measuring the impact of unit active buy transaction volume on stock returns. The higher the buyer impact cost, the worse the stock's ability to accept buy orders and the lower the liquidity. This factor captures the sensitivity of stock prices to buy transactions when the market depth is insufficient or the buyer's trading pressure is too high. Compared with the seller impact cost, the buyer impact cost has a relatively weaker predictive ability for returns, which may be attributed to the loss aversion of investors in their trading behavior. Specifically, because investors tend to avoid losses, buying behavior is usually more passive, which reduces the impact of buying shocks on stock prices. This factor can be used to evaluate market microstructure and investor behavior characteristics.