Quantitative Models and Construction Methods - **Model Name**: Diffusion Index Model **Construction Idea**: The model monitors the critical point of future diffusion index changes to identify potential turning points in the market[37][38] **Construction Process**: The diffusion index is calculated based on the relative price changes of constituent stocks over a specific time window. For example, if all constituent stocks drop by 5% after 5 days, the diffusion index value is 0.05. The formula is: $ Diffusion Index = \frac{\text{Number of stocks with positive changes}}{\text{Total number of stocks}} $ The model uses thresholds (e.g., 0.1) to trigger buy signals. Observations show that the current diffusion index is at 0.1, indicating sufficient adjustment and a potential rise in the next 5 days[37][38][39] **Evaluation**: The model effectively identifies market turning points and provides actionable signals for trading[38] - **Model Name**: First Threshold Method (Left-side Trading) **Construction Idea**: This method triggers buy signals when the diffusion index reaches a predefined threshold[41] **Construction Process**: The first threshold method triggered a buy signal on September 23, 2025, when the diffusion index reached 0.0575[41] **Evaluation**: The method is straightforward and provides early signals for market entry[41] - **Model Name**: Delayed Threshold Method (Right-side Trading) **Construction Idea**: This method provides buy signals after the diffusion index stabilizes above a certain threshold[44] **Construction Process**: The delayed threshold method triggered a buy signal on September 25, 2025, when the diffusion index reached 0.1825[44] **Evaluation**: The method reduces false signals by waiting for confirmation of market trends[44] - **Model Name**: Dual Moving Average Method (Adaptive Trading) **Construction Idea**: This method uses two moving averages to identify buy signals based on trend changes[45] **Construction Process**: The dual moving average method triggered a buy signal on October 13, 2025, based on the crossover of short-term and long-term moving averages[45] **Evaluation**: The method adapts to market trends and provides reliable signals for trading[45] Model Backtesting Results - **Diffusion Index Model**: Current value is 0.10, indicating a potential rise in the next 5 days[37][38][39] - **First Threshold Method**: Triggered buy signal at diffusion index value of 0.0575 on September 23, 2025[41] - **Delayed Threshold Method**: Triggered buy signal at diffusion index value of 0.1825 on September 25, 2025[44] - **Dual Moving Average Method**: Triggered buy signal on October 13, 2025[45] Quantitative Factors and Construction Methods - **Factor Name**: PB Inverse Factor **Construction Idea**: This factor ranks stocks based on the inverse of their price-to-book ratio[31] **Construction Process**: $ PB\_Inverse = \frac{1}{PB} $ The factor is calculated weekly and ranks stocks based on their PB inverse values[31] **Evaluation**: The factor shows strong predictive power for stock performance[31] - **Factor Name**: Dividend Yield Factor **Construction Idea**: This factor ranks stocks based on their dividend yield[31] **Construction Process**: $ Dividend\_Yield = \frac{\text{Annual Dividend}}{\text{Stock Price}} $ The factor is calculated weekly and ranks stocks based on their dividend yield values[31] **Evaluation**: The factor is effective in identifying high-yield stocks with stable returns[31] - **Factor Name**: Non-liquidity Factor **Construction Idea**: This factor ranks stocks based on their non-liquidity characteristics[31] **Construction Process**: $ Non\_Liquidity = \frac{\text{Average Daily Volume}}{\text{Total Shares Outstanding}} $ The factor is calculated weekly and ranks stocks based on their non-liquidity values[31] **Evaluation**: The factor captures stocks with low trading activity, which may have higher potential for price appreciation[31] - **Factor Name**: Free Float Ratio Factor **Construction Idea**: This factor ranks stocks based on the proportion of free-floating shares[31] **Construction Process**: $ Free\_Float\_Ratio = \frac{\text{Free-floating Shares}}{\text{Total Shares Outstanding}} $ The factor is calculated weekly and ranks stocks based on their free float ratio values[31] **Evaluation**: The factor identifies stocks with higher market accessibility and liquidity[31] - **Factor Name**: Profitability Factor **Construction Idea**: This factor ranks stocks based on their profitability metrics[31] **Construction Process**: $ Profitability = \frac{\text{Net Income}}{\text{Total Revenue}} $ The factor is calculated weekly and ranks stocks based on their profitability values[31] **Evaluation**: The factor effectively identifies companies with strong financial performance[31] Factor Backtesting Results - **PB Inverse Factor**: Weekly rank IC value is 0.214, historical average is 0.034[31] - **Dividend Yield Factor**: Weekly rank IC value is 0.103, historical average is 0.022[31] - **Non-liquidity Factor**: Weekly rank IC value is 0.07, historical average is 0.04[31] - **Free Float Ratio Factor**: Weekly rank IC value is 0.054, historical average is -0.012[31] - **Profitability Factor**: Weekly rank IC value is 0.049, historical average is 0.022[31] Composite Strategy and Construction Methods - **Strategy Name**: Small Cap Low Volatility 50 Strategy **Construction Idea**: Select 50 stocks with small market capitalization and low volatility from the micro-cap stock universe[8][17] **Construction Process**: - Filter stocks based on market capitalization and volatility criteria - Select the top 50 stocks meeting the criteria - Rebalance the portfolio bi-weekly[8][17] **Evaluation**: The strategy effectively captures the performance of small-cap stocks with stable returns[8][17] Strategy Backtesting Results - **Small Cap Low Volatility 50 Strategy**: - 2024 annual return: 7.07%, excess return: -2.93%[8][17] - 2025 YTD return: 56.99%, weekly excess return: 0.62%[8][17]