Glossary
Liquidity
How easily a stock can be traded without moving its price. Thinly-traded names look cheap to model but are costly to actually trade — a gap that quietly kills strategies.
In plain terms
A backtest fills every order at the printed close; the real market does not. In thin names the bid-ask spread is wide, your own order moves the price, and the apparent anomaly is often just the compensation someone demands for providing liquidity.
Many of the most attractive-looking signals in our panel concentrated in small, illiquid stocks — which is a warning sign, not a feature. We model explicit spread and impact costs, and several 'edges' did not survive that step alone.
Related terms
Educational definitions only. Not investment advice.