High-frequency upside realized volatility ratio
factor.formula
The percentage of high-frequency upward realized fluctuations:
in:
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It represents the stock's return at the tth minute, usually calculated based on high-frequency trading data, such as the 1-minute, 5-minute, or 10-minute return. The return is calculated as: $r_t = \frac{P_t - P_{t-1}}{P_{t-1}}$, where $P_t$ represents the stock price at the tth minute.
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It means that only the part of $r_t$ with positive yield, that is, the upward yield, is selected.
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It represents the sum of squares of all positive returns and is used to measure the upward volatility. This part captures the accumulation of volatility energy when the stock price rises.
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It represents the sum of squares of all returns (both positive and negative) and is used to measure total volatility. This part captures the overall volatility energy of the stock price within the time window.
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is the length of the lookback window, in trading days. At any stock selection moment, the factor value is the average of the indicators in the previous N trading days. For example, if monthly stock selection is used, the factor calculation will take the average of the stock in the past 20 trading days (assuming 20 trading days per month).
factor.explanation
High-frequency upside realized volatility share measures the extent to which upside (positive return) volatility affects total volatility in the minute-level high-frequency trading data of a stock. Specifically, this factor calculates the ratio of the sum of squares of upside returns to the sum of squares of total returns. If a stock's returns are mainly derived from a few large increases, then its upside volatility share will be relatively high. On the contrary, if the stock's returns are composed of multiple small increases, the factor value will be low. From a microstructural perspective, a high upside volatility share may mean that the market's bullish power on the stock is more concentrated, and the stock price is more likely to rise rapidly. However, this rapid rise may mean that the price is unsustainable and may indicate the risk of future earnings reversal. Therefore, this factor can assist investors in judging the microstructural characteristics of stock price behavior. It should be noted that this factor can be used in combination with other factors to improve the effectiveness of stock selection strategies, and using this factor alone cannot guarantee investment returns.