{"id":560,"date":"2025-12-08T14:00:00","date_gmt":"2025-12-08T14:00:00","guid":{"rendered":"https:\/\/www.tejwin.com\/en\/insights\/factor-strategy-short-interest-ration-part-2\/"},"modified":"2026-09-23T18:19:31","modified_gmt":"2026-09-23T18:19:31","slug":"factor-strategy-short-interest-ration-part-2","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insights\/factor-strategy-short-interest-ration-part-2\/","title":{"rendered":"Factor Strategy \u2013 Applying SIR to Strengthen Momentum Strategies in the Taiwan Market \u2013 SIR Part 2"},"content":{"rendered":"
\"\"<\/figure>\n

Short-Selling Sentiment Factor Strategy<\/span><\/h2>\n

In Part 1 \u2013 Factor Research: The SIR Short-Selling Factor<\/a><\/strong>,\u00a0 we examined the fundamental nature of the Short Interest Ratio (SIR) and clarified how it reflects short-selling sentiment within Taiwan\u2019s equity market. Our empirical findings confirmed that institutional SBL shorting consistently embeds meaningful negative information\u2014particularly among mid- and large-cap stocks, where SIR demonstrates strong and significant predictive power<\/mark><\/strong>. These insights provide a solid foundation for strategy development, but they also raise a more practical question: Can SIR enhance portfolio performance when applied within real-world investment strategies?<\/strong><\/p>\n

In Part 2<\/strong>, we shift from factor interpretation to factor application. Specifically, we explore how SIR can be combined with the 52-week high momentum factor, and whether this integration can strengthen momentum-based strategies in the Taiwan market. Incorporating realistic elements\u2014such as transaction costs, position constraints, and slippage\u2014our backtests evaluate the true feasibility and robustness of SIR-enhanced strategies. Through these results, we assess whether SIR can remain a reliable indicator even under the complexities of real market conditions.<\/p>\n

<\/strong><\/em>TEJ Jo<\/a>ins the Neudata NY Data Summit<\/a><\/strong>!<\/p><\/blockquote>\n

Backtesting Parameters and Strategy Construction<\/span><\/h2>\n

To ensure objectivity and comparability across all strategies, the backtests in this study are conducted under a unified set of assumptions and market conditions.<\/p>\n

Backtest Parameters<\/strong><\/a><\/span><\/h3>\n
    \n
  • Stock Pool: All common stocks listed on the Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEx)<\/li>\n
  • Period: January 2013 \u2013 July 2025<\/li>\n
  • Rebalancing:\u00a0 Monthly (beginning of each month)<\/li>\n
  • Portfolio weighting: Equal weight<\/li>\n
  • Initial capital: NT$10 million<\/li>\n
  • Transaction Costs\uff1a\n
      \n
    • Buy: 0.1425% commission<\/span><\/li>\n
    • Sell: 0.1425% commission + 0.3% securities transaction tax<\/li>\n<\/ul>\n<\/li>\n
    • Slippage Assumption\uff1a 1 tick per transaction<\/li>\n
    • Leverage Constraint\uff1a 0.9 (portfolio market value cannot exceed 90% of net asset value)<\/li>\n<\/ul>\n

      Strategy Construction<\/strong><\/span><\/h3>\n

      A key consideration in this study is that we do not<\/strong> construct a standalone \u201clow-SIR long-only\u201d strategy. As highlighted earlier, a substantial portion of the market\u2014approximately 25% of all observations\u2014consists of stocks with SIR = 0<\/strong><\/mark>. A pure low-SIR strategy would therefore select almost the entire zero-SIR universe, resulting in an overly broad and undifferentiated selection pool. Instead, SIR is used in a more targeted manner:<\/p>\n