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Decile

One of ten equal groups after ranking stocks by something.

Rank a set of stocks by any measure, the borrow fee, last month's return, size, anything, and cut the list into ten equal slices. Each slice is a decile. The top decile holds the ten percent with the highest value, the bottom decile the ten percent with the lowest.

Deciles are how a systematic test asks whether a measure orders returns: if the top decile beats the second, which beats the third, and so on down the list, the measure carries information. If the order is a jumble, it does not. In the logbook that check is called ranking monotonicity.

Explore the diagram (scroll horizontally on small screens)
The measure orders returns12345678910Top decile (highest value)Bottom decileThe measure orders nothing12345678910Top decile (highest value)Bottom decileRank every stock by one measure, cut the list into ten equal slices, and look at each slice's average return.

Where this word comes up

First needed in the log entry H-059 · Testing the shorting premium: what a rebalancing bug taught us.

From the same entry: Borrow fee, Crowded shorts, Delisted, Long-short portfolio, Rebalance, Recall, Short interest percentage, Short selling, Squeeze, t statistic, Universe.

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