factor · Microstructure
Microstructure reads how thinly a stock trades. Liquid mega-caps absorb information continuously; thinly-traded names accumulate latent dislocation that releases as gap moves. The factor is a liquidity-tier proxy for that premium and its execution risk — not a full price-impact model — so the composite can respect both.
Two stocks both look equally attractive on fundamentals. One trades $5bn per day on the NYSE; one trades $50m per day. Decades of evidence (Amihud 2002) say the thinner name should earn a small extra return — investors demand compensation for the risk that they can't exit at the model's price. Microstructure encodes that premium at liquidity-tier level: thinner tiers score higher, and an abnormal single-day move (a sign the crowd has already arrived) trims the premium back. It is one modest input among thirteen — not an execution-cost model, and it does not touch the prediction interval.
inputs · the ticker's liquidity tier (mega / large / mid / small,
classified from float and typical dollar volume)
· today's price move as a rough attention proxy
ideas · smaller tier → higher expected illiquidity premium
(the cross-sectional pattern Amihud 2002 documents)
· an abnormal single-day move signals heavy attention,
which trims the premium for that day (bounded adjustment)
output · tier baseline ± the bounded adjustment, then
cross-sectionally standardised like every other factorThis is deliberately a liquidity-TIER proxy, not a computed Amihud ratio — we do not currently ingest per-ticker volume series for this factor. The tier baselines and the adjustment cap are calibrated and proprietary. Public: the tier structure, the sign convention (smaller/thinner = higher premium, attention trims it), and the academic anchor for why the premium exists (Amihud 2002, Acharya-Pedersen 2005).
The tier classification comes from the universe's curated float / typical-volume banding; the only daily input is the ticker's price change from the scoring sweep. A true Amihud |return| / dollar-volume construction over a trailing window is the planned upgrade — it needs a per-ticker volume history we don't yet ingest for this factor. Until then the factor awards the illiquidity premium at tier granularity: coarse by design, honest about being coarse.
Microstructure currently works at the composite level only: it awards the illiquidity premium to thinner tiers as one modest input among thirteen. It does not gate any confluence pattern (SHORT SQUEEZE SETUP triggers on short interest, momentum and options — not on this factor), and it does not condition the conformal interval: the Mondrian partition is tail-alignment × regime only. Wiring liquidity into squeeze detection and interval width are researched upgrades, not live behaviour.
Two structural limitations. (1) Tier coarseness. The factor sees only which liquidity band a ticker sits in plus today's price move — a name whose liquidity genuinely deteriorates inside its band looks unchanged until it's re-tiered. A computed Amihud ratio over a trailing volume window would catch that; we don't run one yet. (2) Survivorship in the universe. Our 1,001-ticker universe is curated to exclude micro-caps with average daily volume under ~$5m. So microstructure prices within-universe relative liquidity rather than warning against truly untradeable names — those are excluded upstream.
Every ticker page shows the per-factor decomposition. The Microstructure score is one of thirteen composing the 0–100 the composite score.