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Amihud Illiquidity

Updated dailyData needs: lowlong onlyshort onlylong short

2002

#83 amihud_illiquidity — Amihud 2002 JFM "Illiquidity and stock returns".

In plain terms

Measures how much the price moves per dollar traded. Stocks costly to exit must pay investors more — long the illiquid names for the premium.

How it works

Amihud illiquidity = |daily_return| / dollar_volume (x1e6). High ILLIQ means larger price impact per dollar traded, so investors demand a liquidity-risk premium. IMPLEMENTATION (intentional, documented deviation from the paper's cross-sectional decile sort): a within-ticker TIME-SERIES formulation trading Amihud (2002)'s time-series effect (expected illiquidity positively predicts expected returns). Rolling 10/20/40d ILLIQ is ranked against the ticker's OWN trailing 1y history; long when the ticker is in a high-illiquidity regime vs its own history, short when in a low-illiquidity regime. Direction matches the paper (long illiquid / short liquid); the economic bet is liquidity-regime timing, not the cross-sectional illiquidity premium.

Live results

246 times picked on its own · 561 times inside a blend (487 beat the stock) · updated 2026-07-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 561 such blended picks (487 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

Loading substrate evidence…

Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Reported return: ~6 bps/month per unit-std of ILLIQ, cross-sectional (Amihud 2002); the implementation trades the paper's time-series effect, so this figure benchmarks the paper, not the deployed variant
Tested over: 1963-1997

~2-5% annualized, varies with regime. Stronger in small-cap and high-vol regimes.

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