Momentum is the only factor with a positive, significant premium after excluding microcaps: 6.7% net CAGR, 0.67 Sharpe, 0.078 IC. Size earns 0.5%, the value proxy -5.8%, low-vol -5.9%. But a 10-name long-only implementation caps out around 2.5M MAD at 10% of ADV. The factor is real; the capacity is not.
The BVC is thin. Median ADV is 0.83M MAD; the median stock needs 57 days to exit a MAD 5m position at 10% of ADV. Even ATW needs 1.3 days. 84% of names are red-flagged, 68% have a variance ratio below one, 87% show ARCH effects, and the first principal component of log Amihud explains 58% of liquidity variation. A daily-data liquidity audit, with the limits stated.
The MASI lost 7.3% between its September high and its 8 October low, and nearly 10% year to date. This is not a crash: it is a correction that exposes the structure of a market that climbed on one leg — mining — with less and less liquidity, while the global cost of capital was changing regime. What happened, what it does not say, and what to watch.
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