Orient Securities(SH:600958) Orient Securities·2025-06-08 09:42Quantitative Models and Factor Construction Quantitative Models and Construction Methods - Model Name: MFE (Maximized Factor Exposure) Portfolio - Model Construction Idea: The MFE portfolio is designed to maximize single-factor exposure while controlling for constraints such as industry exposure, style exposure, stock weight deviation, and turnover rate[61][62][65] - Model Construction Process: The optimization model is as follows: $\begin{array}{ll} max & f^{T}w \\ s.t. & s_{l}\leq X(w-w_{b})\leq s_{h} \\ & h_{l}\leq H(w-w_{b})\leq h_{h} \\ & w_{l}\leq w-w_{b}\leq w_{h} \\ & b_{l}\leq B_{b}w\leq b_{h} \\ & 0\leq w\leq l \\ & 1^{T}w=1 \\ & \Sigma|w-w_{0}|\leq to_{h} \end{array}$ - Objective Function: Maximize single-factor exposure, where $f$ represents factor values, and $w$ is the weight vector of stocks in the portfolio - Constraints: 1. Style exposure limits: $X$ is the factor exposure matrix, $w_b$ is the benchmark weight vector, $s_l$ and $s_h$ are the lower and upper bounds for style exposure[64] 2. Industry exposure limits: $H$ is the industry exposure matrix, $h_l$ and $h_h$ are the lower and upper bounds for industry exposure[64] 3. Stock weight deviation limits: $w_l$ and $w_h$ are the lower and upper bounds for stock weight deviation[64] 4. Component stock weight limits: $B_b$ is a 0-1 vector indicating whether a stock belongs to the benchmark, $b_l$ and $b_h$ are the lower and upper bounds for component stock weights[64] 5. No short selling and individual stock weight limits[64] 6. Full investment constraint: The sum of weights equals 1[64] 7. Turnover rate constraint: $w_0$ is the previous period's weight, and $to_h$ is the turnover rate upper limit[64] - Model Evaluation: The MFE portfolio effectively isolates single-factor performance under realistic constraints, making it a robust tool for factor effectiveness testing[61][65] Model Backtesting Results - MFE Portfolio Backtesting: - The MFE portfolio is constructed monthly, and its historical returns are calculated after deducting a 0.3% transaction fee. The results are used to evaluate the effectiveness of factors in specific benchmark indices[65] --- Quantitative Factors and Construction Methods - Factor Name: DELTAROE - Factor Construction Idea: Measures the change in return on equity (ROE) over a specific period to capture profitability trends[14][19] - Factor Construction Process: - Formula: $\text{DELTAROE} = \text{ROE}{\text{current}} - \text{ROE}{\text{previous}}$ - Where ROE is calculated as net income divided by average equity[19] - Factor Evaluation: DELTAROE is a strong indicator of profitability improvement and has shown consistent positive performance across multiple indices[6][45][49] - Factor Name: Standardized Unexpected Earnings (SUE) - Factor Construction Idea: Captures the deviation of actual earnings from analyst expectations, standardized by the standard deviation of forecast errors[19] - Factor Construction Process: - Formula: $\text{SUE} = \frac{\text{Actual Earnings} - \text{Expected Earnings}}{\text{Standard Deviation of Forecast Errors}}$[19] - Factor Evaluation: SUE effectively identifies stocks with unexpected earnings surprises, often leading to significant price movements[6][25][45] - Factor Name: Trend - Factor Construction Idea: Measures price momentum using exponentially weighted moving averages (EWMA) with different half-lives[14] - Factor Construction Process: - Formula: $\text{Trend}{120} = \frac{\text{EWMA (half-life=20)}}{\text{EWMA (half-life=120)}}$ - Formula: $\text{Trend}{240} = \frac{\text{EWMA (half-life=20)}}{\text{EWMA (half-life=240)}}$[14] - Factor Evaluation: Trend factors capture momentum effects and have shown strong performance in recent weeks[9][11] --- Factor Backtesting Results - DELTAROE: - Performance: - CSI 300: Weekly return 0.41%, monthly return 1.59%[6][22] - CSI 500: Weekly return 0.95%, monthly return 1.19%[6][26] - CSI 800: Weekly return 1.08%, monthly return 1.62%[6][30] - CSI 1000: Weekly return 1.79%, monthly return 1.54%[6][34] - CSI All Share: Weekly return 1.84%, monthly return 2.41%[6][46] - SUE: - Performance: - CSI 300: Weekly return 0.30%, monthly return 1.53%[6][22] - CSI 500: Weekly return 1.20%, monthly return 1.59%[6][26] - CSI 800: Weekly return 0.34%, monthly return 0.98%[6][30] - CSI 1000: Weekly return 1.46%, monthly return 2.39%[6][34] - CSI All Share: Weekly return 0.96%, monthly return 1.14%[6][46] - Trend: - Performance: - Weekly return: 1.15%[9][11] - Monthly return: 4.58%[11] - Annualized return (1 year): 19.73%[11] - Annualized return (10 years): 13.98%[11]