Equity Screening with Turnover, Order Flow, and Stock Popularity

Summary

This note outlines an equity selection rule that first filters for turnover between 3% and 12% and a ratio of externally initiated trading volume to internally initiated volume greater than 1.3. It then ranks qualifying stocks by a popularity or attention measure, favoring those with higher readings. The rationale is to combine trading activity and a possible buying-pressure proxy with investor attention, and the document includes formula and Python examples of the selection process.

No backtest, return series, or validation of the popularity measure is supplied. The author warns that rankings may change sharply with market sentiment and suggests assessing the measure’s stability and usefulness, or supplementing it with fundamental and price-volume information. The examples also leave implementation details open: one computes average popularity over the available observations, while the stated screen refers to ranking by heat, and the stated turnover endpoints differ in inclusivity between descriptions and code. These ambiguities and the lack of performance evidence mean the rule should be treated as a screening concept rather than a validated strategy.

Key ideas

• The screen keeps stocks with turnover from 3% to 12% and an outside-to-inside volume ratio above 1.3.
• Qualifying stocks are ranked by a popularity or attention indicator.
• The proposed rationale combines trading activity, buying pressure, and market attention.
• The document flags sensitivity to changing sentiment and recommends checking indicator stability.
• It provides no evidence that the selection rule produces positive returns.

Tags

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