Holding period average profit and loss premium
factor.formula
Reference Price Calculation Formula:
The calculation formula for the average capital gain overhang during the holding period is:
in:
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It is the turnover rate of the stock in week t, representing the ratio of the number of stocks traded in that week to the outstanding shares, reflecting the market activity.
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is the closing price at the end of the tth week, reflecting the market valuation of the stock at that point in time.
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is the closing price at the end of week t-n.
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The length of the historical period considered for calculating the reference price is set here to the number of weeks in the past 5 years, i.e. T=260. This parameter determines the depth of the history to be traced back in the calculation of the reference price.
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is the weight normalization coefficient, which ensures that the sum of the weights of all historical prices in the reference price calculation is 1. The specific value of $k$ is equal to $\sum_{n=1}^{T} \left(V_{t-n} \prod_{r=1}^{n-1} (1 - V_{t-n+r})\right) $, and the purpose is to make the calculated reference price an average price with practical significance.
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The reference price for week t represents the estimated average stock holding cost based on weighted calculations of historical transactions and turnover rates. The older the historical price, the lower the weight.
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It is the average profit and loss premium during the holding period in week t, representing the profit and loss premium of the current stock price relative to the reference price.
factor.explanation
This factor aims to capture the average profit and loss status of investors on stocks. The reference price (RP) is not a simple historical average price, but an average holding cost weighted by turnover rate. The core idea is that when the market is active (high turnover rate), the price at that point in time has a greater impact on the average cost of investors, and vice versa. The average profit and loss premium (CGO) during the holding period calculates the deviation between the current stock price and the reference price, reflecting the current overall profit and loss level of investors. A positive CGO value indicates that investors are in a profitable state on average, and there may be pressure for profit-taking, but it may also indicate that the stock is undervalued. A negative CGO value means that investors are in a loss state on average, which may indicate that market sentiment is pessimistic and that stock prices may have bottomed out or are close to bottoming out. This factor is mainly used in quantitative investment, combined with other factors to find potential value reversal opportunities.