Microstructure#107tier 2live in productionNew

`roll implicit spread`

cadence: Dailydata: lowlong onlyshort onlylong short

1984

#106 roll_implicit_spread — Roll 1984 JF bid-ask spread from neg-autocovariance.

What it checks

Effective bid-ask spread inferred from how negatively a stock's daily returns auto-correlate. Spread widening predicts informed-trading pressure and forward underperformance.

Mechanism

Roll (1984, JF) derives the implicit bid-ask spread from neg-autocovariance of daily price changes: 2*sqrt(-Cov(Δp_t, Δp_t-1)). Captures information-asymmetry premium without TAQ data. Spread *delta* (own-history z) is more tradeable than level post-decimalization — widening predicts forward underperformance over 5-21 days (Brennan-Chordia-Subrahmanyam-Tong 2012).

Production data

3 champions · refreshed 2026-05-16

Cup-tier distribution

How this family's promoted champions score on the trailing 1-year window

Beats-rate by market-cap

Where this family's edge concentrates. % of champions in each size bucket that beat buy-and-hold

Trade-count histogram

Continuous vs event-driven character — narrow distributions on the left mean sparse triggers

Δreturn distribution

Δreturn vs buy-and-hold on trailing 1y, capped at ±1000pp to suppress microcap pump artifacts

Signal rule

20d rolling Roll spread / price; 252d own-history z; long when z<-thresh + 60d uptrend (liquidity returning), short when z>thresh + 60d downtrend (stress).

Data dependencies

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

Expected edge

Paper alpha: 3-5% ann. spread-delta short alpha
Paper window: 1963-2002 (Brennan-Chordia 2012 OOS)

Brennan-Chordia 2012: 3-5% ann. spread-widening short alpha post-decimalization.

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corwin schultz spreadMicrostructure

Corwin-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.

idio vol puzzleRisk-Premium

Stocks with high idiosyncratic volatility relative to FF3 earn LOWER returns going forward — the IVOL puzzle (Ang-Hodrick-Xing-Zhang 2006/2009). Counterintuitive (more idio risk should imply higher required return) but robust across 23+ markets. Short top-quintile IVOL (~−7% ann. excess), long bottom-quintile (mild positive carry). Distinct from lottery_max which keys off MAX[5d] peak; IVOL keys off residual stdev.

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roll implicit spread