Market Capitalization Percentile Filters and Ranking Direction

Summary

The document raises a question about two percentile-rank filters used to select stocks by total market capitalization in a dividend-yield strategy. One expression applies a threshold above the default percentile rank, while the alternative explicitly reverses ranking direction and uses a different threshold. The author reports that changing the expression changes backtest returns, despite receiving an explanation that the two forms are equivalent.

The key lesson is that ranking direction and percentile thresholds must be interpreted together, with the function’s default sort order and output convention checked before treating expressions as interchangeable. The document does not provide a reply or establish which expression is correct, and it gives no data, code context, or performance figures. It therefore identifies a useful backtest-reproducibility issue but leaves the underlying discrepancy unresolved.

Key ideas

• Percentile filters depend on both the ranking direction and the threshold applied.
• The document reports different backtest returns from two market-cap filter expressions.
• The function’s default ordering and percentile convention need to be confirmed before comparing expressions.
• The source poses the discrepancy as a question and does not resolve it.

Tags

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