Leveraging S&P 1500 High-Volume Stocks for Daily Rebalanced Strategy

Universe

To ensure a robust and liquid trading universe while avoiding excessive noise from smaller or less liquid stocks, I recommend using the S&P 1500 as the base pool. This index includes ~1,500 large- and mid-cap U.S. stocks, covering ~90% of total market capitalization. It balances breadth with quality, reducing the risk of including thinly traded or speculative names. If this aligns with your goals, we can proceed with the S&P 1500.

Weighting & Rebalancing

The default of equal-weighting the top 500 daily by volume and rebalancing daily is appropriate for testing the strategy’s responsiveness to short-term liquidity dynamics. Equal weighting avoids overconcentration in high-volume outliers and ensures all selected stocks contribute proportionally. If you prefer a different weighting (e.g., volume-weighted to emphasize liquidity or cap-weighted to align with market benchmarks), please clarify.

Trading Prices & Execution

The proposed close-to-close 1-day holding period is standard for intraday momentum strategies and simplifies execution assumptions. Ignoring transaction costs and slippage is acceptable for initial testing, though we can layer in realistic cost estimates (e.g., $0.005 per share commission, 0.05% slippage) if needed for a more granular analysis.

Benchmark

Comparing the strategy to the S&P 500 is a logical choice, as it provides a proxy for broad market performance. Including this benchmark will help assess whether the strategy’s returns are driven by market exposure or alpha generation.

With these parameters confirmed, I can proceed to:
1. Pull volume data for the S&P 1500 constituents from 2022-01-01 to 2025-10-14.
2. Generate daily top-500-by-volume portfolios.
3. Calculate equal-weighted returns, rebalanced daily.
4. Compare results to S&P 500 performance.

Let me know if you’d like to adjust any of the above or add further constraints (e.g., sector neutrality, turnover limits).