Screening Small Chinese Firms by Profitability and Price Amplitude

Summary

This document proposes a Chinese equity screen that combines price amplitude above 1 with five consecutive years of return on equity above 15%, market capitalization below 10 billion yuan, and positive net income. The intended mix is a volatility condition plus sustained profitability, a small-cap constraint, and a basic exclusion of loss-making firms.

The article discusses limitations of each criterion: the capitalization cap can omit larger firms, return on equity does not capture every influence on share performance, and a history without losses is not a complete measure of risk. It suggests adding valuation and trading measures, such as price ratios, volume, and turnover, but supplies no evidence that these changes improve results. The formula and Python examples include placeholders and data assumptions, and parts of the examples appear inconsistent with the stated market-cap threshold and amplitude rule. The screen should be treated as a broad selection template, not a tested investment strategy.

Key ideas

• The proposed screen joins price amplitude with a five-year return-on-equity requirement.
• It also limits candidates by market capitalization and positive net income.
• The author cautions that profitability and absence of losses do not establish low risk.
• Example formulas contain placeholders and should be checked against the stated criteria before use.
• No performance analysis is provided for the proposed screen.

Tags

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