Hypothesis ‐ retained earnings china - kitzz03/WorldQuant-Alphas GitHub Wiki

Alpha

ranked_alpha=rank((rank(ts_delta(mdl175_retainedearningsps, 65)))(rank(ts_delta(mdl175_salesexpensettm,65)))(1+0.5*rank(-open+ts_sum(open,20)/20))); ranked_alpha

Hypothesis

Retained Earnings is a measure of a firm's net income that it has after the distribution of dividend. We put more money on stocs that have increasing trend of retained earnings over time

Datasets used:

  1. mdl175_retainedearningsps : Retained earnings
  2. mdl175_salesexpensettm : Sales expense , TTM

Initial Alpha

Retained Earnings are an indicator of the capability of future investment and dividend. The stocks with increasing retained earnings with time point towards a stock that increases and we go long on them after using rank to seperate them cross-sectionally.

ranked_alpha=(rank(ts_delta(mdl175_retainedearningsps, 65))); ranked_alpha

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We see that the alpha has a good signal overall except the last few months of the IS period.

Improved Alpha

ranked_alpha=rank((rank(ts_delta(mdl175_retainedearningsps, 65)))(rank(ts_delta(mdl175_salesexpensettm,65)))(1+0.5*rank(-open+ts_sum(open,20)/20))); ranked_alpha

improvement can be in multiple steps with pnl of each step attached

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