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Introduction
The short-term reversal is the phenomenon that stocks with relatively low returns over the past month or week earn positive abnormal returns in the following month or week, and stocks with high returns earn negative abnormal returns.
Method
To apply short-term reversal in stocks market, first, we use the universe selection API to pick the stocks with the price higher than 4 and rank those stocks by dollar volume and choose the top 100 stocks as our asset pool. In fine universe selection, the prescreened stocks are sorted by market cap we choose the top 20. To detect the reversal effect, the return is the most straightforward measure of the stock history performance. The RateOfChange indicator is used to calculate the monthly return. We go long on the 10 stocks with the lowest performance in the previous month and go short on the 10 stocks with the greatest performance from the previous month.
Derek Melchin
See the attached backtest for an updated version of the algorithm in PEP8 style.
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Jing Wu
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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