props to this guy if the P&L is real, but this quote will make some CFA heads explode (cc: @naufalsanaullah) https://bit.ly/3oWGqWH pic.twitter.com/xFnib6UGVd
I mean… it sounds insane but it’s basically true? For whatever reason low priced stocks are more volatile, so a $2 stock is more likely to hit $4 than a $60 stock is to hit $120 (also much more likely to go to zero but yolo)
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“Low price” is a genuine exposure that you could include in quant risk models if you wanted to, it basically captures the “shitty stock” factor.
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It has literally been an outperforming factorhttps://finance.yahoo.com/news/worst-stocks-are-doing-the-best-morning-brief-110238013.html …
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Absolutely true. Low-dollar is strongly correlated to low market cap and high leverage. Hence vol.
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Also simply if you think of it from the order book and a price level perspective, stocks increase in value by traveling the same rational number line (not even real numbers, limited to decimals). So a 60 -> 120 stock, assuming good liquidity will have to travel up more
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Trader on my first desk used to make the same argument all the time. He would frame it as "easier" and a bunch of analysts would get all triggered. Pretty great.
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Lack of liquidity I presume? Buys just eat the order book.
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