APEX factor · Spillover
Spillover bets that news affecting a major customer or supplier predicts the linked ticker's next-month return. The market processes upstream/downstream relationships slowly — analysts cover one company in a chain, the other gets re-priced with a delay. The factor reads the lagged information that hasn't crossed the link yet.
Apple reports a great quarter. Foxconn — Apple's primary assembly partner — does not move that day, even though 70% of Foxconn's revenue depends on Apple. Why? The analysts covering Apple write up Apple's report; the analysts covering Foxconn wait for Foxconn's own earnings call three weeks later. Between those three weeks, the new information about Apple demand sits in Foxconn's price as latent re-rating. Spillover formalises this — for every ticker we maintain a graph of revenue-significant suppliers and customers, and whenever a linked node moves, we propagate a shrunken version of the move to the dependent ticker.
for each ticker T with link graph L_T:
for each linked ticker S in L_T:
weight_S = revenue_share(S → T or T → S)
move_S = ret(S, last 30 days) - ret(market, last 30 days)
spill_T_from_S = weight_S · move_S · decay_factor(days_since_S_news)
spillover_raw = Σ spill_T_from_S over all S in L_T
spillover = z_score(spillover_raw)The link graph is built from 10-K disclosure (concentration of customers in Item 1, supplier dependencies in risk factors), supplemented by SEC supply-chain filings and FactSet revenue-by-customer where licensed. Revenue share is the weight per link — a customer that's 40% of revenue carries 4× the weight of one at 10%. Decay factor is the Cohen-Frazzini 30-day post-news window; news older than 30 days no longer contributes.
The link graph rebuilds quarterly from 10-K filings via a customer-segment XBRL tag where companies disclose it, plus a fallback heuristic that infers links from peer-comparison disclosures. Node moves are computed nightly from EOD prices. The factor lives in apex_factor_scores and refreshes during the 06:00 UTC universe sweep. For tickers with no disclosed links — common for diversified holding companies and conglomerates — spillover defaults to a neutral 50 (no link information available).
Spillover composes with Sector momentum (Moskowitz-Grinblatt 1999) — when a sector is rotating up AND a key supplier is propagating positive flow, the SUPPLY-CHAIN MOMENTUM confluence pattern fires bullish. The opposite — sector rotating down plus negative spillover from a major customer — fires the SUPPLY-CHAIN CRACK pattern. Spillover also amplifies PEAD when the customer of a beat-stock is in our universe — the customer's earnings beat tomorrow is our spillover-positive bet today.
Two structural issues. (1) Graph completeness. We only see links companies disclose, which is a SEC-mandated subset (10% revenue concentration thresholds). Real supplier networks are dense and largely opaque. The mid-cap chemicals supplier with seven 8%-revenue customers is invisible to us — its actual diversification profile is masked because no single customer triggers disclosure. (2) Globalisation drift. The Cohen-Frazzini study was US-equity-only over 1980-2004. Modern supply chains span continents — a US ticker's 'real' customer concentration may be a Korean memory manufacturer that doesn't appear in any US-filed 10-K. Our coverage of cross-border links is patchy and on the post-16-May roadmap to extend.
Every ticker page shows the per-factor decomposition. The Spillover score is one of twelve composing the 0–100 APEX composite.