Report Industry Investment Rating No information provided. Core Viewpoints of the Report - Before July, simple trading rules could achieve good results in convertible bond timing, but since July, as the equity market has continuously broken through upward, convertible bond valuations have continued to rise, and strategies based on the mean - reversion logic are prone to missing out on opportunities in the unilateral upward market [4][9]. - The capital flow of institutional investors often leads the market trend. The current unilateral upward equity market started with insurance funds accelerating into the market, pushing up the banking sector, followed by a steeper increase in margin balance, an increase in the equity positions of hybrid funds and first - and second - tier bond funds, and the growth style began to dominate [4][10]. - Public funds are the largest investors in the convertible bond market, and their behavior has an important impact on the convertible bond market. The report focuses on the high - frequency measurement of the convertible bond positions of active public funds [4][19]. - The Kalman filter method is used to measure the convertible bond positions of public funds with a median absolute error of about 3pct at the end of each quarter and an estimated accuracy of about 60% for the change direction of convertible bond positions [4][38][42]. - Public funds show obvious left - hand characteristics in convertible bond allocation, buying more when prices fall and reducing positions when prices rise. The main driving force for the accelerated rise of convertible bonds since June is not public funds, and their convertible bond positions only began to increase significantly in late July [4][49]. Summary According to the Table of Contents 1. From Valuation to Capital: The Evolution of the Timing Framework - Valuation and absolute price are common references for investors in convertible bond timing. Before July, simple trading rules were effective, but since July, strategies based on mean - reversion logic are easy to miss opportunities in the unilateral upward market [4][9]. - The capital flow of institutional investors has a leading effect on the market. The current equity market's unilateral rise started with insurance funds entering the market, followed by an increase in margin balance and the equity positions of hybrid and bond funds, and the growth style became dominant [4][10]. - Public funds are the largest investors in the convertible bond market, holding 35% of Shanghai Stock Exchange convertible bonds and 36% of Shenzhen Stock Exchange convertible bonds as of the end of August. Active public funds' convertible bond holdings are mainly concentrated in hybrid funds and first - and second - tier bond funds, while passive convertible bond funds are mainly ETFs [19]. 2. High - Frequency Measurement of Public Fund Positions - The frequency of public funds' position information disclosure is low and lacks timeliness. Common high - frequency measurement methods include the quadratic programming method and the Kalman filter method [27]. - **Kalman Filter**: It is a recursive algorithm with two stages: prediction and update. It estimates the current state based on the previous state's estimated value and the current observation value [28]. - **Model Setting**: Assume that the assets held by funds include stocks, convertible bonds, pure bonds, and cash, and establish equations based on asset weights, fund returns, and asset returns [35]. - **Data Description**: The main measurement objects are hybrid and first - and second - tier bond funds. Samples are selected according to certain criteria each quarter. The returns of different asset classes are represented by corresponding indices. Initial values are adjusted and iterated quarterly [36]. 3. Model Effect Evaluation - **Absolute Error**: The median absolute error of the model's measurement of sample funds' convertible bond positions at the end of each quarter is about 3pct [38]. - **Direction Accuracy**: The model's estimated accuracy for the change direction of sample funds' convertible bond positions each quarter is about 60% [42]. - **Typical Sample Analysis**: For sample funds with large short - term position fluctuations, the model's measurement error is relatively large. There are usually breakpoints in the position measurement results between the end of each quarter and the beginning of the next quarter [46]. 4. Institutional Behavior Analysis - Public funds show obvious left - hand characteristics in convertible bond allocation, buying more when prices fall and reducing positions when prices rise. The main driving force for the accelerated rise of convertible bonds since June is not public funds, and their convertible bond positions only began to increase significantly in late July [49].