Liquidity-Adjusted Volume Zero Days Ratio
factor.formula
Liquidity Adjusted Volume Zero Ratio (Lm²):
in:
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The number of trading days with zero daily trading volume in the past period (Lookback) reflects the degree of illiquidity of the stock. Zero trading volume usually means that the stock lacks trading activity on that day, indicating that its liquidity is poor.
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is the scaling factor, which is equal to 1. This item is used to scale the zero-value days to avoid the factor value being too large. Here it is 1, and no scaling is performed.
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It is the reciprocal of the average daily turnover rate of the stock in the past period (Lookback). The higher the turnover rate, the better the liquidity of the stock, and the lower the value. The reciprocal is used to form a consistent negative relationship with the number of zero-value days. The turnover rate is usually calculated by dividing the daily trading volume by the total share capital.
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The length of the lookback period, in months. It indicates the size of the past time window used as a reference when calculating the factor. For example, if Lookback is 3, it means that the factor is calculated using data from the past three months.
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The total number of trading days in the past period (Lookback). Used to standardize the number of zero-value days and the length of the lookback period.
factor.explanation
This factor aims to capture the liquidity risk of stocks more comprehensively by combining the number of trading days with zero volume and the average turnover rate information. Stocks with poor liquidity tend to have higher risk premiums, so this factor can be used to identify stocks that may have excess return opportunities. The higher the factor value, the poorer the stock liquidity, and the higher the corresponding liquidity risk premium may be. This factor can be used in combination with other factors to construct a more effective quantitative stock selection strategy. The value of this factor is generally negative, and the larger the absolute value, the poorer the liquidity.