{"id":39392,"date":"2025-08-12T17:30:00","date_gmt":"2025-08-12T09:30:00","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=39392"},"modified":"2026-05-11T17:52:02","modified_gmt":"2026-05-11T09:52:02","slug":"factor-strategy-capital-gain-overhang-part-2","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/","title":{"rendered":"Factor Strategy \u2013 Capital Gain Overhang | Part 2\u00a0"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/Factor-Strategy_CGO-1-1024x576.png\" alt=\"\" class=\"wp-image-39401\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/Factor-Strategy_CGO-1-1024x576.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/Factor-Strategy_CGO-1-300x169.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/Factor-Strategy_CGO-1-150x84.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/Factor-Strategy_CGO-1-768x432.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/Factor-Strategy_CGO-1-1536x864.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/Factor-Strategy_CGO-1.png 1920w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a06143004695\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a06143004695\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Introduction\" >Introduction&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Strategy_Construction\" >Strategy Construction<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Backtest_Parameters\" >Backtest Parameters:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Backtest_Results\" >Backtest Results<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Pure_CGO_Strategy\" >Pure CGO Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Enhanced_Strategies_with_Sequential_Sort\" >Enhanced Strategies with Sequential Sort<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#Conclusion\" >Conclusion&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-capital-gain-overhang-part-2\/#%F0%9F%92%BC_Empower_Your_Quant_Strategy_with_TEJ\" >\ud83d\udcbc Empower Your Quant Strategy with TEJ&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span><strong>Introduction&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the <a href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-research-capital-gain-overhang-part-1\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/insight\/factor-research-capital-gain-overhang-part-1\/\"><strong>previous study : Factor Research \u2013Capital Gain Overhang | Part 1<\/strong><\/a>, we examined the Capital Gain Overhang (CGO) factor, designed to capture the behavioral bias known as the Disposition Effect. By measuring the gap between current market prices and investors\u2019 average cost basis, CGO quantifies unrealized gains and losses at the market level. Empirical tests in Taiwan\u2019s equity market confirmed that CGO is a meaningful predictor of future returns: <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">high-CGO stocks consistently outperformed low-CGO stocks, generating significant positive alpha beyond standard Fama\u2013French models, especially over medium- to long-term horizons<\/mark><\/strong>.<\/p>\n\n\n\n<p class=\"has-background has-medium-font-size has-mobile-text-align-center\" style=\"background-color:#ffe9ae\"><strong><em>\ud83d\udc49<a href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-research-capital-gain-overhang-part-1\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/insight\/factor-research-capital-gain-overhang-part-1\/\">Part 1\uff1aFactor Research\uff0dCapital Gain Overhang.<\/a><\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strategy_Construction\"><\/span><strong>Strateg<\/strong>y <strong>Construction<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To evaluate the practical performance of CGO, we construct and backtest three types of strategies. The first is a pure CGO factor strategy, serving as the baseline. The other two are enhanced versions that <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">combine CGO with low-risk filters<\/mark><\/strong>. These enhanced strategies adopt a <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Sequential Sort approach<\/mark><\/strong>: first applying a low-risk filter to narrow the investment universe, and then ranking the remaining stocks by CGO to select the final portfolio.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>cgo (Pure CGO strategy):<\/strong> Selects the top 50 stocks with the highest CGO values. This serves as the benchmark strategy, reflecting the pure effect of CGO.<br><\/li>\n\n\n\n<li><strong>cgo_low_tv (CGO + Low Volatility):<\/strong> Sequential Sort method. <br>Step 1: select the 10% of stocks with the lowest <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">historical volatility<\/mark><\/strong> (TV100). <br>Step 2: within this subset, choose the top 50 by CGO.<br><\/li>\n\n\n\n<li><strong>cgo_low_ivol (CGO + Low Idiosyncratic Volatility):<\/strong> Sequential Sort method. <br>Step 1: select the 10% of stocks with the lowest <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"><strong>idiosyncratic volatility<\/strong><\/mark> (IVOL100). <br>Step 2: within this subset, choose the top 50 by CGO.<br><\/li>\n<\/ul>\n\n\n\n<p class=\"has-background has-medium-font-size\" style=\"background-color:#ffe9ae\"><em><strong>\ud83d\udc49<a href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-research-idiosyncratic-volatility\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/insight\/factor-research-idiosyncratic-volatility\/\">What is Idiosyncratic Volatility, how does it works in factor investing?<\/a><\/strong> <\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Backtest_Parameters\"><\/span>Backtest Parameters:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>\u300cEvery 5 months, stocks are ranked by the factor rules, and the top 50 are selected into the portfolio.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Stock Pool:<\/strong> All common stocks listed on the Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEx)<\/li>\n\n\n\n<li><strong>Period:<\/strong> January 2005 \u2013 June 2025<\/li>\n\n\n\n<li><strong>Rebalancing:<\/strong> Every 5 months<\/li>\n\n\n\n<li><strong>Portfolio weighting:<\/strong> Equal weight<\/li>\n\n\n\n<li><strong>Initial capital:<\/strong> NT$10 million<\/li>\n<\/ul>\n\n\n\n<p class=\"has-background has-medium-font-size\" style=\"background-color:#ffe9ae\"><em>\ud83d\udccc <a href=\"https:\/\/www.tejwin.com\/en\/news\/factor-library\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/news\/factor-library\/\">All data and factors are sourced from the <strong>TEJ Factor Library<\/strong>, which enables clean monthly signal construction and portfolio simulation.&nbsp;<\/a><\/em><\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Backtest_Results\"><\/span>Backtest Results<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Table 1: Backtest Performance of Factor Strategies<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table class=\"has-background\" style=\"background-color:#ffe9ae\"><thead><tr><th><\/th><th class=\"has-text-align-right\" data-align=\"right\">cgo<\/th><th class=\"has-text-align-right\" data-align=\"right\">cgo_low_tv<\/th><th class=\"has-text-align-right\" data-align=\"right\">cgo_low_ivol<\/th><th class=\"has-text-align-right\" data-align=\"right\">Benchmark<\/th><\/tr><\/thead><tbody><tr><td>Annual return<\/td><td class=\"has-text-align-right\" data-align=\"right\">14.89%<\/td><td class=\"has-text-align-right\" data-align=\"right\">14.04%<\/td><td class=\"has-text-align-right\" data-align=\"right\">13.57%<\/td><td class=\"has-text-align-right\" data-align=\"right\">10.74%<\/td><\/tr><tr><td>Cumulative returns<\/td><td class=\"has-text-align-right\" data-align=\"right\">1502.49%<\/td><td class=\"has-text-align-right\" data-align=\"right\">1281.51%<\/td><td class=\"has-text-align-right\" data-align=\"right\">1173.04%<\/td><td class=\"has-text-align-right\" data-align=\"right\">668.12%<\/td><\/tr><tr><td>Annual volatility<\/td><td class=\"has-text-align-right\" data-align=\"right\">16.45%<\/td><td class=\"has-text-align-right\" data-align=\"right\">8.46%<\/td><td class=\"has-text-align-right\" data-align=\"right\">9.23%<\/td><td class=\"has-text-align-right\" data-align=\"right\">18.38%<\/td><\/tr><tr><td>Sharpe ratio<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.927<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.596<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.425<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.647<\/td><\/tr><tr><td>Max drawdown<\/td><td class=\"has-text-align-right\" data-align=\"right\">-57.29%<\/td><td class=\"has-text-align-right\" data-align=\"right\">-32.91%<\/td><td class=\"has-text-align-right\" data-align=\"right\">-35.54%<\/td><td class=\"has-text-align-right\" data-align=\"right\">-56.02%<\/td><\/tr><tr><td>Sortino ratio<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.257<\/td><td class=\"has-text-align-right\" data-align=\"right\">2.165<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.936<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.898<\/td><\/tr><tr><td>Alpha<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.080<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.096<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.086<\/td><td class=\"has-text-align-right\" data-align=\"right\">&nbsp;<\/td><\/tr><tr><td>Beta<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.631<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.361<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.410<\/td><td class=\"has-text-align-right\" data-align=\"right\">&nbsp;<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><em>Benchmark: TAIEX Total Return Index, Jan 2005 \u2013 June 2025<\/em>)&nbsp;<\/figcaption><\/figure>\n\n\n\n<p><strong>Figure 2: Cumulative Returns of Factor Strategies<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"478\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/2508_CGO3-1024x478.png\" alt=\"\" class=\"wp-image-38875\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/2508_CGO3-1024x478.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2508_CGO3-300x140.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2508_CGO3-150x70.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2508_CGO3-768x358.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2508_CGO3-1536x717.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/2508_CGO3-2048x956.png 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pure_CGO_Strategy\"><\/span><br><br>Pure CGO Strategy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We first examine the Pure CGO strategy Backtest results show that the strategy delivers an annualized return of 14.9%, significantly outperforming the market benchmark (10.7%). However, this outperformance comes with notable risks: annualized volatility of 16.5% and a maximum drawdown of \u201357%, only slightly better than the market. The Sharpe ratio of 0.93 indicates a reasonable level of risk-adjusted performance, but there remains substantial room for improvement.<\/p>\n\n\n\n<p>In short, the pure CGO strategy confirms that the factor generates<mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"> <strong>strong alpha<\/strong><\/mark><strong>,<\/strong> but its standalone application exposes investors to considerable<strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">volatility and downside risk<\/mark><\/strong>.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Enhanced_Strategies_with_Sequential_Sort\"><\/span>Enhanced Strategies with Sequential Sort<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>To improve the risk\u2013return profile, we combine CGO with low-risk factors using a Sequential Sort approach.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>cgo_low_tv (CGO + Low Volatility):<\/strong> The results are striking: annualized volatility drops to <strong>8.5%<\/strong>, nearly half that of the pure CGO strategy, while maximum drawdown improves to <strong>\u201333%<\/strong>. The Sharpe ratio rises to <strong>1.60<\/strong>, demonstrating substantial enhancement in risk-adjusted returns.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>cgo_low_ivol (CGO + Low Idiosyncratic Volatility):<\/strong> This strategy uses idiosyncratic volatility (IVOL100) as the filter. The outcome is similar, with volatility reduced to <strong>9.2%<\/strong> and maximum drawdown contained at <strong>\u201336%<\/strong>. The Sharpe ratio improves to <strong>1.43<\/strong>, higher than the pure CGO strategy but slightly below cgo_low_tv.<\/li>\n<\/ul>\n\n\n\n<p>Beyond risk reduction, both enhanced strategies demonstrate a dual advantage of <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"><strong>alpha purification<\/strong> <\/mark>and <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">beta reduction<\/mark>.<\/strong> Compared with the pure CGO approach, their beta values fall sharply (0.63 \u2192 0.36 for cgo_low_tv; 0.41 for cgo_low_ivol), while alpha remains high or even improves (0.096 for cgo_low_tv; 0.086 for cgo_low_ivol). This indicates that <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">risk filters not only control volatility but also help CGO isolate more stable and genuine sources of excess return.<\/mark><\/strong><\/p>\n\n\n\n<p>Together, the results highlight that adding low-risk filters significantly improves portfolio robustness. Among the two enhanced versions, the<strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">cgo_low_tv strategy<\/mark> <\/strong>shows the most balanced performance, suggesting that <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">historical volatility<\/mark><\/strong> is a more effective complementary screen than idiosyncratic volatility.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This study conducts a systematic examination of the Capital Gain Overhang (CGO) factor in Taiwan\u2019s equity market. The results show that CGO is an effective behavioral factor: while it offers strong excess returns, it also comes with elevated volatility. When combined with low-risk factors, however, its risk-adjusted performance improves significantly.<\/p>\n\n\n\n<p>A pure CGO strategy generates an annualized return of around 15%, but with volatility as high as 16%. In contrast, the sequential-sorting strategy cgo_low_tv (filtering first by low volatility, then ranking by CGO) reduces annualized volatility to 8.5%, while raising the Sharpe ratio from 0.93 \u2192 1.60. These improvements are both statistically and economically significant.<\/p>\n\n\n\n<p>Overall, the findings confirm that <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">CGO is a valid source of excess return.<\/mark><\/strong> More importantly, applying CGO within a risk-controlled portfolio framework allows investors to capture its value in practice while maintaining portfolio stability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"%F0%9F%92%BC_Empower_Your_Quant_Strategy_with_TEJ\"><\/span><strong>\ud83d\udcbc Empower Your Quant Strategy with TEJ<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">TEJ Factor Library<\/mark><\/strong> provides over 100 standardized alpha factors\u2014including IVOL, momentum, valuation, and quality\u2014built with<mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"> <strong>point-in-time methodology<\/strong><\/mark> for clean backtests. Combined with <strong>TEJ Market &amp; Financial Data<\/strong>, it enables seamless:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Stock ranking and portfolio screening<\/li>\n\n\n\n<li>Factor backtesting and performance attribution<\/li>\n\n\n\n<li>Multi-factor strategy construction<\/li>\n<\/ul>\n\n\n\n<p class=\"has-pale-ocean-gradient-background has-background has-medium-font-size\">\ud83d\udce9Explore how CGO and other factors perform in your portfolio universe?&nbsp;<br>Visit<strong><em> <a href=\"https:\/\/www.tejwin.com\/en\/news\/factor-library\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/news\/factor-library\/\">TEJ Factor Library<\/a><\/em><\/strong><a href=\"https:\/\/www.tejwin.com\/en\/news\/factor-library\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/news\/factor-library\/\"> <\/a>or contact us to request a <strong>custom factor analysis demo<\/strong>.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-tej wp-block-embed-tej\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"275OappLU0\"><a href=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-idiosyncratic-volatility\/\">Factor Strategy \u2013 Idiosyncratic Volatility | Part 2\u00a0<\/a><\/blockquote><iframe class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; visibility: hidden;\" title=\"&#8220;Factor Strategy \u2013 Idiosyncratic Volatility | Part 2\u00a0&#8221; &#8212; TEJ\" src=\"https:\/\/www.tejwin.com\/en\/insight\/factor-strategy-idiosyncratic-volatility\/embed\/#?secret=QIqgY7XGyj#?secret=275OappLU0\" data-secret=\"275OappLU0\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>In the previous study, we examined the Capital Gain Overhang (CGO) factor, designed to capture the behavioral bias known as the Disposition Effect. By measuring the gap between current market prices and investors\u2019 average cost basis, CGO quantifies unrealized gains and losses at the market level. Empirical tests in Taiwan\u2019s equity market confirmed that CGO is a meaningful predictor of future returns: high-CGO stocks consistently outperformed low-CGO stocks, generating significant positive alpha beyond standard Fama\u2013French models, especially over medium- to long-term horizons.<\/p>\n","protected":false},"featured_media":39401,"template":"","tags":[2926,3540,2962,2987,3421],"insight-category":[690,3509],"class_list":["post-39392","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-factor-investing","tag-factor-library","tag-market-data","tag-quant","tag-quantitative-strategy","insight-category-data-analysis","insight-category-fintech-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/39392","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":8,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/39392\/revisions"}],"predecessor-version":[{"id":43641,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/39392\/revisions\/43641"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/39401"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=39392"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=39392"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=39392"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}