A-Share Screen Combining Turnover, Price, and ROE

Summary

The document presents a Chinese equity screening rule that combines trading activity, short-term price location, and a multi-year profitability filter. It selects stocks with turnover between 3% and 12%, an opening price within 5% of the 10-day moving average of closing prices, and return on equity above 15% for five consecutive years. The stated rationale is to favor actively traded stocks near a short-term average while requiring a record of profitability. It includes example formula and Python-style implementations, though their calculations are not fully consistent with the written rule.

The author cautions that the screen omits other financial risks and growth considerations, and that requiring sustained high ROE may leave a small sample vulnerable to overfitting. Suggested refinements include adding valuation or other financial measures and adjusting parameters. The document offers no backtest results or evidence that the screen produces excess returns. Its screening thresholds are a rule proposal, not a validated investment strategy.

Key ideas

• The screen combines a turnover range, proximity of the opening price to a 10-day average, and a five-year ROE threshold.
• Its rationale blends trading activity, short-term price context, and long-term profitability.
• The author warns that the rule omits financial risks and growth factors.
• A restrictive ROE requirement may produce a small sample and raise overfitting concerns.
• The document proposes screening logic but does not provide performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.