liquidity provision premium
What it checks
Stocks falling sharply bounce — bounce is bigger when VIX is high.
Mechanism
5d reversal compensates liquidity providers; scales with VIX.
Signal rule
5d return loser/winner sort, sized by VIX-vs-252d-median (full at high-VIX, 0.4x at low); hold 1/3/5d
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
vix_pricesWorker data table — see services/worker schema.
Expected edge
- Paper alpha
- 2-3x STR Sharpe
- Paper window
- 1998-2010
Nagel 2012: VIX-conditional reversal Sharpe 2-3x unconditional STR.
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
short term reversalMean-ReversionStocks that fell sharply over the last 3-10 days tend to bounce in the following 3 days. We z-score recent N-day returns against a 60-day baseline; a z ≤ -1.5 to -2.5 triggers a 3-bar long entry. This is the textbook Jegadeesh (1990) short-horizon reversal — the inverse of medium-term momentum and a proxy for liquidity-provision premiums.
amihud illiquidityMicrostructureAmihud illiquidity = |daily_return| / dollar_volume (×1e6). High ILLIQ → larger price impact per dollar traded → liquidity-risk premium. 20-day rolling Amihud measure ranks tickers; long top-decile illiquid (premium for bearing illiquidity), short bottom-decile.
corwin schultz spreadMicrostructureCorwin-Schultz 2012 JF derive a closed-form unbiased estimator of percentage spread from daily high-low ranges (β, γ, α terms). Beats Roll out-of-sample because high-low retains intraday volatility information close-to-close discards. Used by institutional liquidity-cost desks.
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