Coefficient of variation of turnover
factor.formula
Coefficient of variation = average transaction amount / standard deviation of transaction amount
This formula calculates the coefficient of variation of the daily transaction volume series in the last K months. The specific steps are as follows:
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Represents the daily transaction volume time series from t-K+1 to t. Where t is the current date and K is the number of months of the backtracking time window. For example, if K=3, it represents the daily transaction volume data for the last three months.
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Represents the average daily transaction volume in the last K months. This value reflects the average level of transaction volume during this period.
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Indicates the standard deviation of daily transaction volume in the last K months. This value reflects the fluctuation range of transaction volume during this period.
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Divide the average transaction amount by the standard deviation of the transaction amount to get the coefficient of variation of the transaction amount. The larger the value, the higher the relative volatility of the transaction amount and the higher the market liquidity risk may be. If the value is small, it means that the volatility of the transaction amount is relatively small and the market liquidity is good.
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mean(TransactionVolume_{t-K+1:t}), where TransactionVolume represents Transaction Volume
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std(TransactionVolume_{t-K+1:t}), where TransactionVolume represents Transaction Volume
factor.explanation
The coefficient of variation of trading volume is an important indicator to measure the volatility of trading volume over a period of time. It compares the fluctuation range (standard deviation) of trading volume with the average level of trading volume to obtain a relative volatility indicator, which can effectively eliminate the impact of differences in trading volume between different stocks, thereby more accurately reflecting the relative volatility risk of trading volume. A higher coefficient of variation usually means greater volatility of trading volume, poor market liquidity, and higher trading risk, and vice versa. This indicator can help investors judge the market trading activity and potential liquidity risks.