Quantitative Models and Construction Methods 1. Model Name: A-share Market Cap/GDP Ratio (Buffett Indicator) - Model Construction Idea: The ratio of the total market capitalization of the stock market to GDP is used to measure the alignment between market valuation and the economic fundamentals. A lower ratio indicates the market is undervalued relative to the economy, suggesting potential room for a bull market, while a higher ratio signals potential market bubbles[16][17]. - Model Construction Process: - The formula is: $ \text{Buffett Indicator} = \frac{\text{Total Market Cap of A-share}}{\text{GDP}} $ - Interpretation: - Below 60%: Severely undervalued, often seen during major bear markets or periods of extreme economic pessimism (e.g., 2005, 2008, 2013-2014, 2018, and October 2022)[16] - Above 100%: Significantly overvalued, indicating potential market bubbles (e.g., 150% during the 2007 bull market peak, 120% during the 2015 bull market peak)[17] - Model Evaluation: This indicator is a useful tool for long-term asset allocation and strategic market timing. However, it should not be used as the sole decision-making tool and is not suitable for short-term trading[20]. 2. Model Name: Ratio of Household Deposits to Total Market Cap - Model Construction Idea: This ratio reflects the relative abundance of "off-market funds" compared to "on-market assets." It is conceptualized as the "water reservoir" (household deposits) versus the "irrigated farmland" (stock market capitalization)[21]. - Model Construction Process: - The formula is: $ \text{Ratio} = \frac{\text{Household Deposits}}{\text{Total Market Cap of A-share}} $ - Interpretation: - A higher ratio indicates more off-market funds relative to the stock market, suggesting potential for market inflows - A lower ratio indicates a higher proportion of funds already invested in the market - Model Evaluation: Similar to the Buffett Indicator, this ratio provides a general indication of market conditions but cannot pinpoint exact turning points. It is also slightly overestimated as it does not account for Chinese investments in overseas markets like Hong Kong and the US[24]. 3. Model Name: Financing Balance/Total A-share Free-float Market Cap Ratio (Leverage Activity Indicator) - Model Construction Idea: This ratio measures the activity level of leveraged funds in the A-share market and serves as a barometer for market risk appetite. It evaluates the proportion of the market driven by borrowed funds[25]. - Model Construction Process: - The formula is: $ \text{Leverage Activity Ratio} = \frac{\text{Financing Balance}}{\text{Total A-share Free-float Market Cap}} $ - Interpretation: - A higher ratio indicates high investor sentiment and optimism, with more willingness to leverage - A lower ratio indicates lower investor confidence - Model Evaluation: While this indicator is useful for gauging market trends, it should be used cautiously as leverage can amplify both market gains and losses. It is essential to remain aware of the potential risks associated with high leverage[28]. 4. Model Name: Stock-Bond Investment Cost-Effectiveness (Equity Risk Premium) - Model Construction Idea: This model compares the expected returns of stocks and bonds to determine which asset class offers better value. It measures the equity risk premium, which is the additional return investors expect for taking on the higher risk of stocks[29]. - Model Construction Process: - The formula is: $ \text{Equity Risk Premium} = \text{Expected Stock Market Return} - \text{Bond Yield} $ - Interpretation: - Equity risk premium > 4%: Stocks are undervalued and have high cost-effectiveness - Equity risk premium between 2%-4%: Stocks are slightly more attractive, suggesting a balanced allocation - Equity risk premium < 2%: Bonds become more attractive due to their defensive value - Model Evaluation: This indicator is a reliable measure of relative attractiveness between stocks and bonds. However, it should be used in conjunction with other macroeconomic indicators for a comprehensive analysis[32]. 5. Model Name: Market Overall Valuation - Model Construction Idea: This indicator evaluates the overall valuation level of the market. When the valuation reaches historically high levels, it signals that asset prices are expensive, and market sentiment is overly optimistic, potentially forming a market top[33]. - Model Construction Process: - The valuation is calculated based on historical data and compared to previous market peaks - Historical reference points include 2015 (valuation of 23.11) and 2018 (valuation of 19.12) - Model Evaluation: While this indicator is useful for identifying potential market tops, it should be used alongside macroeconomic factors. High valuations do not always indicate an imminent market top, as markets can remain overvalued for extended periods[36]. 6. Model Name: Low-Priced Stock Ratio - Model Construction Idea: This indicator analyzes the proportion of low-priced stocks in the market, which tends to increase during the late stages of a bull market due to speculative behavior. It serves as an auxiliary indicator for market trend analysis[37]. - Model Construction Process: - The ratio is calculated as the proportion of low-priced stocks in the market - Historical trends are analyzed to identify correlations between low-priced stock ratios and market trends - Model Evaluation: This indicator is not an absolute signal but serves as a supplementary tool for market analysis. It is particularly useful for identifying speculative bubbles in the market[40]. 7. Model Name: Shareholder Reduction - Model Construction Idea: This indicator tracks the behavior of corporate insiders (e.g., shareholders) who are considered to have the best understanding of a company's intrinsic value. A significant increase in shareholder reduction may indicate overvaluation[41]. - Model Construction Process: - Monthly frequency data is used to calculate: $ \text{Net Reduction Events} = \frac{\text{Reduction Events} - \text{Increase Events}}{\text{Total Number of Stocks}} $ - Model Evaluation: This indicator is more effective in identifying market bottoms when shareholder increases outnumber reductions. It is less reliable for identifying market tops but can still provide valuable insights when combined with other indicators[44]. 8. Model Name: Small Transaction Volume - Model Construction Idea: This indicator reflects market sentiment and changes in participant structure. It is based on the logic of the transition between "retail investors entering" and "smart money exiting"[45]. - Model Construction Process: - The indicator is calculated as follows: 1. Calculate the ratio of small order net active buy volume to total trading volume for each stock on a weekly basis 2. Select the top 10% of stocks with the highest retail participation 3. Compute the average of the indicator for these stocks and standardize it using a 150-week rolling z-score - Model Evaluation: This indicator is a useful supplementary signal for market sentiment. However, it should be used in conjunction with other indicators, as small transaction volume alone may not provide a complete picture of market conditions[48]. 9. Model Name: CSI 300 Turnover Ratio - Model Construction Idea: This indicator measures the proportion of CSI 300 turnover relative to the total A-share market turnover. It is used to assess changes in market capital flow and risk appetite, providing insights into whether the market is driven by value or speculation[49]. - Model Construction Process: - The formula is: $ \text{CSI 300 Turnover Ratio} = \frac{\text{CSI 300 Turnover}}{\text{Total A-share Turnover}} $ - A 5-day moving average is used for stability - Model Evaluation: This indicator is effective in identifying market tops, especially when the ratio exceeds 45%. Currently, the ratio is at 26%, indicating a healthy market condition[53]. 10. Model Name: Proportion of Equity Fund Issuance - Model Construction Idea: This classic market sentiment indicator examines the relationship between equity fund issuance and market performance. Extreme values and trends in this ratio are considered warning signs of market overheating[54]. - Model Construction Process: - The formula is: $ \text{Proportion of Equity Fund Issuance} = \frac{\text{Monthly Equity Fund Issuance}}{\text{Total A-share Free-float Market Cap}} $ - Model Evaluation: The peak values of this indicator have a strong correlation with market trends. Currently, the proportion is relatively low, indicating a healthy market condition[57]. --- Model Backtesting Results 1. A-share Market Cap/GDP Ratio (Buffett Indicator) - Current value: 88%[17] 2. Ratio of Household Deposits to Total Market Cap - Current value: 47.35%[24] 3. Financing Balance/Total A-share Free-float Market Cap Ratio - Current value: 2.5%[28] 4. Stock-Bond Investment Cost-Effectiveness (Equity Risk Premium) - Current value: 3.96%[32] 5. Market Overall Valuation - Current value: 17.33[36] 6. Market Low-Priced Stock Ratio - Current value:
量化看市场系列之二：市场运行状态与位置监控的十大指标
Huachuang Securities·2025-11-13 06:44