Monthly Equity Selection with Valuation, Momentum, and Turnover Factors

Summary

The strategy ranks stocks each month using five inputs: trailing-twelve-month price-to-earnings and price-to-sales ratios, price-to-book value, one-month price momentum, and one-month trading value. The author reports that trailing-twelve-month PE and PS measures worked better than static values in empirical testing, but provides no supporting statistics or details about the test design in the supplied text.

After processing each factor’s exposure, the strategy sorts the full stock universe and combines the factor rankings into a score for each stock. It rebalances monthly based on those scores and holds no more than 30 stocks. The author says the strategy has substantial drawdown and currently includes a stop-loss condition, with further risk controls still under consideration. No return series, benchmark comparison, transaction-cost assumptions, or validation period are included here, so the ranking recipe and its risk caveat are more informative than any claim of effectiveness.

Key ideas

• The stock ranking combines valuation, price momentum, and trading-value measures.
• PE and PS use trailing-twelve-month data, which the author says performed better than static values in testing.
• Factor exposures are processed and ranked, then combined into a stock-level score.
• The strategy rebalances monthly and caps holdings at 30 stocks.
• The author flags substantial drawdown and notes that risk controls remain incomplete.

Tags

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