The Investable Universe

The Investing Universe

In Equities Lab, we refer to the universe as the sets of securities included in screens, ranks and backtests.

By default, we want to include only stocks that are reasonably liquidatable, as otherwise it is very easy to create screeners that work great on paper and lousy in practice.

Summary of Equities Lab default universe conditions:

• exclude micro cap stocks
• USA exchange traded
• average daily volume above 500k
• not a single penny stock

Custom Universe

You can define your own universe. The way you do so is by defining a special variable universe within your editor. I would encourage you to do so only if you know exactly what you are doing.

When using your own universe and back testing, we highly recommend you also define a trading cost term that approximately models the cost of the stocks you end up buying using a trading_cost term. We provide the Kini trading model that can be used as a approximation of costs, but once you have included very small illiquid stocks in your strategy, it is very much guess work for how much it will cost to trade with them.