Quantitative Models and Factor Analysis Quantitative Models and Construction - **Model Name**: Hang Seng Stock Connect Index (HSISC) **Model Construction Idea**: The index selects all eligible securities from the Hang Seng Index constituents that qualify for Stock Connect, aiming to reflect the overall performance of these stocks traded via Stock Connect[26] **Model Construction Process**: 1. **Sample Space**: Constituents of the Hang Seng Index (base index)[26] 2. **Selection Criteria**: All securities eligible for Stock Connect[26] 3. **Adjustment Mechanism**: - **Regular Adjustments**: Quarterly adjustments to the index sample[26] - **Temporary Adjustments**: Replacement based on changes in the base index and Stock Connect eligibility[26] **Model Evaluation**: The index demonstrates high elasticity, providing significant beta returns during market uptrends[27] Quantitative Factors and Construction - **Factor Name**: Technical Factor **Factor Construction Idea**: Measures the exposure of the Hang Seng Stock Connect Index to technical indicators relative to the Hang Seng Index[38] **Factor Construction Process**: 1. Analyze the factor exposure of the Hang Seng Stock Connect Index relative to the Hang Seng Index[38] 2. Quantify the exposure value for the technical factor, which is -0.066[38] **Factor Evaluation**: The index shows notable exposure to technical factors, along with other factors such as profitability, dividends, and volatility[38] Backtesting Results of Models - **Hang Seng Stock Connect Index**: - **Cumulative Return**: 49.92%[29] - **Annualized Return**: 39.22%[29] - **Annualized Volatility**: 24.48%[29] - **Sharpe Ratio**: 1.60[29] - **Maximum Drawdown**: 20.08%[29] Backtesting Results of Factors - **Technical Factor**: Exposure value of -0.066[38] - **Profitability Factor**: Exposure value of -0.029[38] - **Dividend Factor**: Exposure value of 0.026[38] - **Volatility Factor**: Exposure value of 0.022[38] Additional Metrics for the Hang Seng Stock Connect Index - **Valuation Metrics**: - Price-to-Earnings (PE): 10.08x[40] - Price-to-Book (PB): 1.08x[40] - **Profitability**: Return on Equity (ROE): 10.63%[42] - **Liquidity**: Trading volume accounts for 52% of the Hang Seng Composite Index, with a historical low congestion percentile of 9%[45] - **Dividend Yield**: 4.76%, higher than the CSI All Share Index (2.68%) and CSI 300 Index (3.59%)[49]