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Liquidity Provision Premium

Updated dailyData needs: lowlong onlyshort onlylong short

paper

2012

Source

Nagel, S. (2012). "Evaporating Liquidity." Review of Financial Studies, 25(7), 2005-2039.

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In plain terms

Stocks falling sharply bounce — bounce is bigger when VIX is high.

How it works

5d reversal compensates liquidity providers; scales with VIX.

Live results

980 times picked on its own · 1130 times inside a blend (1057 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 1130 such blended picks (1057 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)

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Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Vix prices
A data feed this strategy reads, refreshed on its normal schedule.

Expected edge

Reported return: 2-3x STR Sharpe
Tested over: 1998-2010

Nagel 2012: VIX-conditional reversal Sharpe 2-3x unconditional STR.

Example tickers where this is likely to fire

AAPL MSFT AMZN GOOG META

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

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Stocks that fell sharply over the last few days tend to bounce; stocks that ripped tend to fade. A 1-week mean-reversion bet.

Amihud IlliquidityPrice & Market Behavior

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

Corwin Schultz SpreadPrice & Market Behavior

A more precise daily-bar bid-ask spread estimator than Roll's, using high-low ranges. We go long only, when a stock's estimated spread widens sharply versus its own one-year history while it is in an uptrend; thresholds vary. No short side.

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See which tickers this family is currently firing on, with live signals and rankings.

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