Merge pull request #1 from jingwu74/Algorithm26-BookToMarketAnomaly

Add new algorithm Book-to-Market Value Anomaly

Author: jingwu74

04 Strategy Library/00 Strategy Library/01 Strategy Library.php

@@ -198,6 +198,14 @@
         ],
         'description' => 'Buys each month the 20% of commodities with the highest roll-returns and shorts the 20% of commodities with the lowest roll-returns and holds the long-short positions for one month.'
     ],
+    [
+        'name' => 'Book-to-Market Value Anomaly',
+        'link' => 'strategy-library/book-to-market-value-anomaly',
+        'sources' => [
+            'Quantpedia' => 'https://www.quantpedia.com/Screener/Details/26'
+        ],
+        'description' => 'Quintile portfolios are formed based on the Book-to-Market ratio and the highest quintile is held for one year.'
+    ],
 ];
 
 ?>

04 Strategy Library/30 Book-to-Market Value Anomaly/01 Introduction.html

@@ -0,0 +1,10 @@
+<p>
+  Book-to-market ratio is used to find the value of a company by comparing the book value of a firm to its market value. The definition of the book-to-market ratio is
+  \[Book\ to\ Market \ Ratio=\frac{Common\ Shareholders \ Equity}{Market \ Cap}=\frac{book \ value \ per \ share}{Market \ price \ per \ share}\]
+  Book value represents a company's assets minus its liabilities and sometimes is referred to as shareholders' equity.
+  Price-to-Book Ratio is defined as
+  \[Price \ to \ Book\ Ratio=\frac{Market \ price \ per \ share}{book \ value \ per \ share}\]
+  Therefore, we can see the Book-to-market ratio is the inverse of the P/B ratio.
+  The book-to-market ratio suggests how much investors are paying against each dollar of book value in the balance sheet. 
+  The bigger the ratio is, the more fundamentally cheap is the investigated company. This algorithm will create the portfolio with this factor.
+</p>

04 Strategy Library/30 Book-to-Market Value Anomaly/02 Method.html

@@ -0,0 +1,27 @@
+<p>
+  To construct the universe, first we eliminate stocks which don't have fundmental data. In <code>FineSelectionFunction</code>,
+  we calculate the market cap with PE ratio, earning per shares and shares outstanding and assign the property <code>MarketCap</code>
+  to each fine fundamental object. The universe is narrowed to top 20% companies with the highest market cap. 
+</P>
+<p>
+  According to the algorithm, the portfolio is weighted based on market cap. We calculte the weight in <code>FineSelectionFunction</code> and save
+  them in <code>self.weights</code>.
+</P>
+<div class="section-example-container">
+<pre class="python">
+fine = [x for x in fine if (x.ValuationRatios.PBRatio > 0)]
+for i in fine:
+    i.MarketCap = float(i.EarningReports.BasicAverageShares.ThreeMonths * (i.EarningReports.BasicEPS.TwelveMonths*i.ValuationRatios.PERatio))
+top_market_cap = sorted(fine, key = lambda x:x.MarketCap, reverse=True)[:int(len(fine)*0.2)]
+top_bm = sorted(top_market_cap, key = lambda x: 1 / x.ValuationRatios.PBRatio, reverse=True)[:int(len(top_market_cap)*0.2)]
+self.sorted_by_bm = [i.Symbol for i in top_bm]
+total_market_cap = np.sum([i.MarketCap for i in top_bm])
+self.weights = {}
+for i in top_bm:
+    self.weights[str(i.Symbol)] = i.MarketCap/total_market_cap
+return self.sorted_by_bm
+</pre>
+</div>
+<p>
+In the next step, we sort the stocks with the inverse of P/B ratio by descending order. Quintile portfolios are then formed based on the Book-to-Market ratio and the highest quintile is held for one year.
+</p>

04 Strategy Library/30 Book-to-Market Value Anomaly/03 Algorithm.html

@@ -0,0 +1,6 @@
+<div class="qc-embed-frame" style="display: inline-block; position: relative; width: 100%; min-height: 100px; min-width: 300px;">
+    <div class="qc-embed-dummy" style="padding-top: 56.25%;"></div>
+    <div class="qc-embed-element" style="position: absolute; top: 0; bottom: 0; left: 0; right: 0;">
+        <iframe class="qc-embed-backtest" height="100%" width="100%" style="border: 1px solid #ccc; padding: 0; margin: 0;" src="https://www.quantconnect.com/terminal/index.php?key=processCache&request=embedded_backtest_d8cd05d85b47eea4381d2ca20abf2f74.html"></iframe>
+    </div>
+</div>

04 Strategy Library/30 Book-to-Market Value Anomaly/04 Source.html

@@ -0,0 +1,5 @@
+<ul>
+  <li>
+    <a href="https://quantpedia.com/Screener/Details/26" rel="nofollow">Quantpedia - Value (Book-to-Market) Anomaly</a>
+</li>
+</ul>

quantpedia.json

@@ -16,4 +16,5 @@
      21: "203a6729604c80a71b5c3b2baa2b3f69",
      22: "d7285b5353d51cd5bd033f205e5faf44",
      25: "da3bf5ee608fb8b7dc952372dd925542",
+     26: "d8cd05d85b47eea4381d2ca20abf2f74",
 }