Chinese Equity Screening with Turnover, Order Flow, and Persistent ROE

Summary

The proposed screen selects stocks with turnover between 3% and 12%, an external-to-internal trading volume ratio above 1.3, and return on equity above 15% across five consecutive years. It combines a liquidity and trading-activity filter with a measure of sustained profitability. The post also suggests adding valuation measures such as price-to-earnings or price-to-book ratios and considering whether high ROE is sustainable.

The document provides formula and Python examples, but the formula examples do not consistently match the stated logic: they use price and volume comparisons where the prose describes turnover and external versus internal volume. The Python example checks the stated fields but gives no backtest, universe definition, rebalance timing, transaction-cost assumptions, or performance evidence. The author notes that omitting other fundamentals may leave valuation unexamined and that requiring a five-year ROE history can exclude newer companies.

Key ideas

• The screen combines a turnover range, an external-to-internal volume ratio threshold, and persistent high ROE.
• The stated criteria aim to pair trading activity with a record of profitability.
• Valuation filters may complement the profitability and trading-activity conditions.
• A five-year profitability requirement can exclude newer firms.
• The supplied formula examples do not fully correspond to the prose description.

Tags

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