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Easy · backtesting · Quant Researcher interview question · backtesting, amihud, illiquidity, market-microstructure, rolling-window
The Amihud illiquidity ratio, defined as an asset's absolute return per dollar of trading volume, is a key measure of price impact. Rolling averages of this ratio are essential inputs for liquidity-adjusted return models, transaction cost analysis, and portfolio capacity management. Task Implement the function solution(returns: list, volumes: list, window: int) -> list to calculate the rolling Amihud illiquidity ratio. For each sliding window, compute the average of the daily |return| / volume