Change in 60-day earnings-to-market ratio
factor.formula
60-day change in earnings-to-market ratio = current earnings-to-market ratio (EP_t) - earnings-to-market ratio 60 trading days ago (EP_{t-60})
The formula calculates the difference between the current earnings-to-market ratio and the earnings-to-market ratio 60 trading days ago.
- :
The earnings-to-price ratio of the current trading day. The Earnings-to-Price Ratio (EP Ratio) is calculated by dividing the company's most recently reported earnings (e.g., earnings in the last 12 months) by the current market value. The EP ratio is a common indicator for measuring a company's valuation level, and the higher the EP ratio, the cheaper the company's valuation.
- :
Earnings-to-market ratio 60 trading days ago. Calculated the same way as EP_t, but using company earnings and market capitalization data from 60 trading days ago.
factor.explanation
This factor captures the change in the earnings-to-market ratio over the past 60 trading days. A positive value represents an increase in the earnings-to-market ratio, which means that the company's valuation has become more attractive relative to its profitability, which may imply the market's positive expectations for the company's prospects. A negative value, on the contrary, indicates that the company's valuation has become less attractive relative to its profitability, which may indicate a weakening of market sentiment. This factor can be used in combination with other value factors to construct a more comprehensive value investment strategy. At the same time, changes in this factor may also contain a momentum effect, that is, stocks with improved valuations may continue to show strong upward momentum in the future. Therefore, this factor has both the attributes of a value factor and certain attributes of a momentum factor.