Volume-weighted residual reversal factor
factor.formula
Volume-weighted capital flow intensity:
Residual inversion factor:
in:
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The amount of small buy orders executed at the time (\tau) represents the power of active buying.
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The amount of small sell orders executed at the time (\tau) represents the power of active selling.
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The volume-weighted fund flow intensity accumulated at time (t). This indicator measures the accumulation of net active buying or selling power from the initial time to time (t) and is volume-normalized.
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At time (t), the stock returns over the past 20 trading days reflect the traditional reversal factor concept.
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The intercept term of the regression model represents the size of the expected reversal return when the capital flow intensity is zero.
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The slope of the regression model measures the impact of changes in capital flow intensity on reversal returns.
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The residual term of the regression model represents the remaining reversal returns that cannot be explained by the intensity of capital flows after controlling for the impact of capital flow intensity. This term is the final residual reversal factor value.
factor.explanation
The volume-weighted residual reversal factor effectively eliminates the interference of volume factors on the reversal effect by regressing the traditional reversal returns on the intensity of volume-weighted capital flows, allowing the factor to more accurately reflect reversal opportunities driven by non-volume factors (such as market sentiment, news, etc.). The residual part contains a purer reversal signal and may have stronger stock selection capabilities. In particular, by using volume weighting rather than a simple difference in buy and sell amounts, the impact of volume on capital flows can be better standardized, making the factor more adaptable to stocks with different volume levels.