Ranking Stocks by a Combined Equity and Profitability Factor

Summary

This short BigQuant assignment describes a daily stock-ranking approach built from a combination of total equity and trailing-twelve-month average return on equity. Each day, the strategy holds stocks with comparatively high values of the combined factor. It uses a simple eligibility screen requiring trailing-twelve-month net profit to be positive, on the reasoning that adding many filters could shrink the candidate pool too much.

The document states the factor idea and basic screening choice, but gives no formula for combining the inputs, portfolio size, weighting method, holding or rebalance mechanics, benchmark, or backtest results. It therefore offers a sketch of a fundamental factor strategy rather than enough detail to reproduce or evaluate it. The choice to keep filtering simple is a design rationale, not evidence that the signal is predictive; factor scaling, financial statement timing, survivorship, and portfolio risk controls are not addressed.

Key ideas

• The proposed factor combines total equity with trailing-twelve-month average return on equity.
• The strategy selects stocks with higher factor values each day.
• A positive trailing-twelve-month net profit condition serves as the stated eligibility filter.
• The document provides no backtest evidence or detailed portfolio construction rules.
• The combined factor formula and treatment of reporting delays are unspecified.

Tags

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