Measuring Stock Buying Pressure with Time-Weighted Relative Price Position

Summary

This equity factor study measures buying and selling pressure through the amount of time a stock spends at different positions within its recent price range. It first normalizes price between the interval’s high and low to obtain relative price position (RPP), then takes a time-weighted average of RPP (ARPP). A high ARPP indicates that a stock has spent more time near the upper part of its range. The authors calculate the measure over short, medium, and longer rolling windows, smooth each over 20 trading days, and use the resulting factors to rank stocks.

The note reports that higher factor values were associated with higher future average returns across tested universes. For one factor in the CSI All Share universe, it reports a monthly mean Rank IC of 6.8% and an annualized long-short return of 23%. Factors built from widely separated windows showed low correlation, suggesting complementary information, and reportedly retained selection effects after controlling for other factor groups. The evidence is historical; the source flags model failure and extreme-market shocks as risks.

Key ideas

• Relative price position normalizes a stock’s price within its recent high-low range.
• The time-weighted average of relative price position measures how long price stays near the top or bottom of its range.
• The study builds factors from three price-position windows and smooths them over 20 trading days.
• Higher ARPP readings were associated with higher future average returns in the reported tests.
• Factors using widely separated windows had low correlation and may contribute distinct information.

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