Quantitative Factors and Construction Methods 1. Factor: Foreign Currency Funds to Total Monetary Funds Ratio - **Construction Idea**: This factor is derived from the financial notes in the balance sheet, focusing on the proportion of foreign currency funds to total monetary funds. It reflects the intensity and breadth of a company's overseas business activities[5][13]. - **Construction Process**: - Data Source: Wind - Calculation: The factor is defined as the proportion of foreign currency funds to total monetary funds. Adjustments are made for cases where the total exceeds the monetary funds amount due to multi-currency conversions[15][16]. - Formula: $$ \text{factor} = 1 - \frac{ik}{2k} \tilde{w} \wedge \tilde{R} \wedge \tilde{P} \nrightarrow \frac{ik}{2k} / \frac{ik}{2k} \tilde{w} \nrightarrow \frac{ik}{2k} \nrightarrow \frac{ik}{2k} $$ - **Evaluation**: The factor shows a good performance in small and mid-cap stocks, with positive excess returns in most industries[28][30]. - **Backtest Results**: - Monthly average Rank IC: 1.35% - Annualized return: 8.50% - Annualized excess return: 3.65% - Maximum drawdown: 5.29% - Average market coverage: ~80%[5][13][23]. 2. Factor: Stability of Overseas Business Income Ratio - **Construction Idea**: This factor is derived from the financial notes in the income statement, focusing on the stability of the ratio of overseas business income to main business income over time[5][13]. - **Construction Process**: - Data Source: Wind - Calculation: The factor is defined as the ratio of current overseas business income to current main business income, adjusted for historical volatility[42][43]. - Formula: $$ \text{factor} = \frac{\text{current overseas business income}}{\text{current main business income}} / \text{std(ratio)}_{\text{t=1,\cdots,6}} $$ - **Evaluation**: The factor performs better in small and mid-cap stocks, with significant excess returns in export-oriented industries[56][58]. - **Backtest Results**: - Monthly average Rank IC: 1.69% - Annualized return: 11.07% - Annualized excess return: 3.56% - Maximum drawdown: 4.41% - Average market coverage: ~40%[5][13][48]. 3. Factor: Stability of Major Customer Sales Income Ratio - **Construction Idea**: This factor considers the stability of the ratio of sales income from the largest customer to the company's main business income over time[5][13]. - **Construction Process**: - Data Source: Wind - Calculation: The factor is defined as the standard deviation of the ratio of sales income from the largest customer over the past three years[72][73]. - Formula: $$ \text{factor} = \text{std}(\text{largest customer sales income ratio})_{\text{t=1,\cdots,3}} $$ - **Evaluation**: The factor shows good performance in small and mid-cap stocks, with positive excess returns in most industries[83][85]. - **Backtest Results**: - Monthly average Rank IC: -1.97% - Annualized return: 9.31% - Annualized excess return: 4.17% - Maximum drawdown: 3.46% - Average market coverage: ~60%[5][13][78]. Composite Factor Models and Backtest Results 1. Three-Factor Equal-Weighted Composite - **Construction Idea**: Combining the three factors with equal weights to enhance stability and performance[99][100]. - **Backtest Results**: - Monthly average Rank IC: 2.25% - ICIR: 0.441 - Annualized return: 11.84% - Annualized excess return: 4.77% - Maximum drawdown: 2.95%[14][100][101]. 2. Two-Factor Equal-Weighted Composite - **Construction Idea**: Combining the foreign currency funds ratio and major customer sales income ratio factors with equal weights, considering data coverage issues[99][118]. - **Backtest Results**: - Monthly average Rank IC: 2.24% - ICIR: 0.667 - Annualized return: 9.38% - Annualized excess return: 4.09% - Maximum drawdown: 2.26%[14][118][120].