Hypothesis eps china abhas - kitzz03/WorldQuant-Alphas GitHub Wiki

Alpha

x =rank(ts_delta(mdl175_spe, 63) / ts_std_dev(ts_delta(mdl175_spe, 63), 126))ts_rank(sales,63)(ts_rank(-debt_lt,63));

y= regression_neut(regression_neut(x,ts_delta(close,378)),ts_mean(log(volume),20));

signed_power(y-0.5,5)

Hypothesis

Companies with increasing earnings per share adjusted to their volatility will continue to generate outstanding profits and outperform the market.

Datasets used:

mdl175_spe: Earnings per share, a measure of company's profitability

sales: net sales per turnover

debt_lt: lost term total debt

Initial Alpha

rank(ts_delta(mdl175_spe, 63) / ts_std_dev(ts_delta(mdl175_spe, 63), 126))

taken change of eps over a quarter and normalized it using its standard deviation taking into account half a year. This causes us to select stocks with growing profits and lower volatility in terms of generating the profits

image

Improved Alpha

to make the idea more robust we tried amplifying the signal by selecting good companies growing in terms of sales and lowering their standing long term debts.

image

also we observed that stocks with increasing eps could be generating income because of increase in the stock market as a whole and also due to large volume of investors trading in the particular stock which could influence the overall sentiment regarding the company in the market boosting its income. therefore to remove the linear effects of long-term price changes and recent trading volume and isolate the effect of the fundamental momentum factor we neutralize the alpha with this market volatility. neutralised with price change of 1.5 years and mean log volume (log of volume so as to sober the effects of volume changes) over a month. rank has range from 0 to 1 so to amplify the difference between good and bad companies we will apply signed power which further makes the alpha more robust, making stronger signals more pronounced while preserving the direction. image

Answers to questions by judges:

why market neutralization - because we wanted to reduce the effects of a growing market

why decay so large = 15 - reduce the turnover from 15% to 8% which also improved fitness by a huge margin

why 1.5 years and not 1 year - ???

Links:

https://pubsonline.informs.org/doi/full/10.1287/mnsc.2023.4904

https://www.investopedia.com/terms/e/eps.asp

Backstory:

(optional)

some quote

something related to chess

some book

Further scope of improvement: