Average monthly transaction volume
factor.formula
The average daily transaction volume in the last K months is calculated as follows:
in:
- :
Represents the number of lookback months, that is, the number of the most recent month used when calculating the mean. This value is usually a positive integer.
- :
Represents the number of trading days in each month. Usually, the number of trading days in different months may vary. Here, the average is taken for unified calculation
- :
Represents the trading volume on the dth trading day of the tth month. Trading volume refers to the total amount of money traded on that stock on a specific trading day.
factor.explanation
Average monthly trading volume is an important indicator for measuring stock liquidity. Stocks with high liquidity are more convenient to trade, have lower transaction costs, and more stable prices. Therefore, investors usually require lower expected returns for stocks with high liquidity. On the contrary, for stocks with low liquidity, investors will require higher returns due to high transaction costs and difficulty in cashing out. This is the embodiment of liquidity premium. This factor can capture the liquidity risk factors in the market and can be used to construct quantitative investment strategies.