Daily Stock Rotation by Recent Returns
Summary
This strategy ranks stocks by recent returns and refreshes a portfolio each day. It starts with a chosen number of holdings, sells the weakest-ranked names, and replaces them with the strongest-ranked stocks from the eligible pool. The return measure compares the previous close with the close a specified number of days earlier. The document frames the method with stories about random stock selection and describes a historical test setup using a CSI 300 universe, daily rebalancing, and a stated period from January to July 2017; it reports no test results.
The strategy’s rules leave important implementation details open, including transaction costs, slippage, price limits, and how ties or missing return data are handled. A suspension rule postpones trades in affected stocks and makes up the missed buys or sells on the following day. Random-selection anecdotes motivate reducing discretionary decisions, but they do not establish that this particular ranking strategy has an edge. The description also does not clarify whether its return formula subtracts one to express a percentage change.
Key ideas
- Rank eligible stocks by returns over a configurable lookback period.
- Replace the weakest-ranked holdings with stronger-ranked candidates on a daily schedule.
- The described test uses a CSI 300 stock universe and reports its dates, but gives no performance results.
- When suspended stocks cannot be traded, defer their orders and adjust the following day’s trades.
- Random-stock-selection anecdotes motivate systematic investing but do not prove this strategy is profitable.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.