High-Velocity Equal-Weight Strategy Tests Daily Top 500 U.S. Stocks for Performance Edge

Universe Definition

The back-test will use the 500 most actively traded U.S. common stocks each day, as this aligns with the dynamic nature of high-volume trading strategies. A fixed universe (e.g., S&P 500) would introduce selection bias and reduce the strategy’s adaptability to real-time market conditions.

Weighting Scheme

An equal-weighting scheme will be applied to the 500 selected stocks. This approach avoids overexposure to large-cap or high-volume stocks and ensures diversification across the entire daily universe.

Transaction Assumptions

Zero commissions and slippage will be assumed for simplicity, as the focus is on strategy logic rather than transaction cost analysis. However, a sensitivity test using standard cost assumptions (e.g., $0.005 per share for commissions and 0.05% slippage) can be added if requested.

Rebalancing Window

The strategy will hold positions for 1 day, with entry at the close of the day’s trading and exit at the close of the following day. This aligns with the definition of a daily rebalancing window and ensures consistency in the time horizon.

With these parameters confirmed, I will proceed to:
1. Pull historical data for the 500 most actively traded U.S. stocks.
2. Generate daily signal files based on the equal-weighting scheme.
3. Execute the back-test under the specified transaction and rebalancing assumptions.
4. Provide a performance report, including Sharpe ratio, annualized returns, and drawdown metrics.

Let me know if you’d like to adjust any of these parameters before proceeding.