UBS(US:UBS) Hua Er Jie Jian Wen·2025-09-05 03:33Core Insights - UBS research indicates that technical indicators based on price and volume dynamics show remarkable effectiveness in the Chinese A-share market, particularly in small-cap stocks, generating excess returns (Alpha) that significantly surpass those in the mature U.S. market [1][3]. Technical Indicator Categories - UBS categorizes technical indicators into five main types: Momentum, Volatility, Intraday Pattern, Volume, and Price-Volume Interaction, and has backtested their performance in the Chinese market [1][3]. Momentum Indicators - The SLOPE indicator leads the momentum category with an annualized long-short return of 31% and a risk-adjusted return of 1.4 [4][5]. Volatility Indicators - The NATR (Normalized Average True Range) indicator shows that high volatility typically predicts lower future returns, with a cumulative return of 300% over 15 years and an annualized return of 20% [6]. Intraday Pattern Indicators - The KSFT (Candlestick Shift) factor stands out with a 39% annualized long-short return, achieving a risk-adjusted return of 1.7 [3][8]. Volume Indicators - The VMA (Volume Weighted Moving Average) has consistently delivered double-digit positive returns, with an annualized long-short return of 16% [10]. Price-Volume Interaction Indicators - The PTC (Price-Turnover Correlation) factor measures the consistency between price movements and trading activity, achieving a 27% annualized long-short return and a risk-adjusted return of 1.7 [17]. Small-Cap Stock Premium - UBS highlights a significant "small-cap premium" in the Chinese market, where technical indicators perform much better on small-cap stocks (e.g., CSI 2000) compared to large-cap stocks (e.g., CSI 300) [15][18]. Comparison with U.S. Market - The performance of technical indicators in the Chinese market is markedly superior to that in the U.S. market, with the best-performing KSFT indicator in the U.S. yielding only 7%-15% annualized returns, while similar indicators in China exceed 30% [19][20]. - Structural factors such as higher retail participation and turnover rates in the Chinese market create more significant opportunities for technical indicators compared to the more institutionalized U.S. market [21].