Quantitative Models and Construction Methods Single Strategy Models - **Model Name**: High Prosperity Industry Rotation Strategy **Construction Idea**: Tracks industry profitability expectations using multi-factor models based on analysts' consensus data to select industries with upward profitability trends [13][15][16] **Construction Process**: 1. Constructs three types of factors: - Type 1: Long-term profitability factors (e.g., ROE_FY2, ROE_FY1) - Type 2: Quarterly changes in profitability (e.g., EPS_F2_qoq, EPS_F3_mom) - Type 3: Monthly changes in profitability (e.g., EPS_F3_qoq_d1m) 2. Filters industries with extreme valuations using PB percentile thresholds [30] 3. Selects top 3 industries based on composite factor rankings and allocates equally [21][30] **Evaluation**: Demonstrates strong performance in tracking industry cycles and avoiding valuation bubbles [13][26] - **Model Name**: Implicit Sentiment Momentum Strategy **Construction Idea**: Captures "unverified sentiment" by removing the relationship between turnover rate changes and returns, aiming to identify market sentiment-driven opportunities [32][33] **Construction Process**: 1. Uses OLS regression to remove "expected sentiment" from daily industry returns, leaving residuals as "unverified sentiment" [34] 2. Constructs momentum factors based on cumulative "unverified sentiment" returns over various time windows (e.g., 1 month, 12 months) [35] 3. Enhances the strategy by neutralizing fundamental impacts, adjusting for volatility, and applying composite factor methods [36] **Evaluation**: Effectively captures sentiment-driven market dynamics ahead of fundamental data releases [32][37] - **Model Name**: Macro Indicator Style Rotation Strategy **Construction Idea**: Uses macroeconomic indicators to predict industry styles (e.g., value, momentum) and maps them to industry selection [43][44] **Construction Process**: 1. Constructs macro indicators (e.g., PMI, CPI, M1) using historical positioning, surprise, and marginal change metrics [48][49] 2. Builds style factors (e.g., Value, Beta, Momentum) based on industry exposures [50][51] 3. Maps style predictions to industry scores and selects top industries [61] **Evaluation**: Addresses limitations of traditional top-down models by incorporating style-based predictions [43][61] - **Model Name**: Mid-to-Long-Term Momentum Reversal Strategy **Construction Idea**: Explores the "momentum-reversal" structure in industry returns, combining short-term momentum and long-term reversal factors [70][71] **Construction Process**: 1. Constructs momentum factors based on single-month returns and reversal factors based on multi-month returns (e.g., 12-month momentum, 24-36 month reversal) [76][78] 2. Combines factors using rank-weighted methods and adjusts for turnover rates [80][85] **Evaluation**: Balances short-term trends and long-term recovery opportunities effectively [70][84] - **Model Name**: Fund Flow Industry Rotation Strategy **Construction Idea**: Tracks institutional and tail-end fund flows to identify industry momentum [91][92] **Construction Process**: 1. Constructs "institutional trend strength factors" based on net buy amounts [93][94] 2. Constructs "tail-end inflow strength factors" based on post-14:30 net inflow data [96][103] 3. Combines factors and excludes high-concentration industries [100][101] **Evaluation**: Enhances stability by avoiding crowded trades [91][101] - **Model Name**: Financial Report Failure Reversal Strategy **Construction Idea**: Utilizes mean-reversion characteristics of long-term effective financial factors after short-term failures [108][109] **Construction Process**: 1. Constructs financial factors (e.g., ROA, YOY) using profit and balance sheet data [110][114] 2. Identifies "long-term effective factors" and "recently failed factors" based on rolling windows [116][117] 3. Combines factors using zscore methods [117] **Evaluation**: Captures recovery opportunities in temporarily underperforming factors [108][118] - **Model Name**: Traditional Low-Frequency Multi-Factor Scoring Strategy **Construction Idea**: Combines factors from four dimensions (momentum, valuation, liquidity, quality) for quarterly industry rotation [122][123] **Construction Process**: 1. Selects top-performing factors from each dimension (e.g., 1-year momentum, ROE_TTM) [124][125] 2. Combines factors using rank-weighted methods [135] 3. Filters industries with low weights in the CSI 800 index [135] **Evaluation**: Suitable for long-term holding with robust risk control [122][129] Composite Strategy Models - **Model Name**: Volatility-Controlled Composite Strategy **Construction Idea**: Allocates funds across single strategies based on inverse negative volatility [138][139] **Construction Process**: 1. Calculates negative volatility for each strategy over a rolling window (e.g., 63 days) [139][140] 2. Allocates funds proportionally to inverse negative volatility [139][147] 3. Adjusts allocation frequencies to match individual strategy cycles (weekly, monthly, quarterly) [141][146] **Evaluation**: Balances risk and return effectively, achieving high annualized excess returns [138][144] --- Model Backtest Results Single Strategy Results - **High Prosperity Strategy**: Annualized excess return 16.69%, max drawdown -12.95%, IR 1.29 [26] - **Implicit Sentiment Strategy**: Annualized excess return 18.61%, max drawdown -17.83%, IR 1.04 [37] - **Macro Style Strategy**: Annualized excess return 7.01%, max drawdown -23.46%, IR 0.30 [63] - **Momentum Reversal Strategy**: Annualized excess return 11.42%, max drawdown -14.91%, IR 0.77 [84] - **Fund Flow Strategy**: Annualized excess return 11.64%, max drawdown -12.16%, IR 0.96 [101] - **Financial Report Strategy**: Annualized excess return 9.13%, max drawdown -10.54%, IR 0.87 [118] - **Low-Frequency Multi-Factor Strategy**: Annualized excess return 12.00%, max drawdown -13.25%, IR 0.91 [129] Composite Strategy Results - **Volatility-Controlled Composite Strategy**: Annualized excess return 12.2%, max drawdown -6.8%, IR 1.80 [144][147]

Group 1 - The stock market is experiencing a volatile rebound with a narrow breadth of gains, indicating an unhealthy rise, suggesting a "tentative entry" rather than a "full commitment" strategy for stock selection [1] - 95% of the components in the European benchmark index are above their 10-day moving average, a rare phenomenon that typically signifies that "easy upward space" has been exhausted [1] - U.S. President Donald Trump's softened tone on tariffs has helped the Stoxx 600 index reach its highest point since early April, while the S&P 500 recorded its best weekly performance of 2023 [1] Group 2 - Major stock indices have recovered over half of their declines since Trump's "liberation day" tariff announcement, largely due to short covering [3] - If volatility continues to ease, investors may further increase their stock exposure, although defensive positioning remains emphasized, particularly in healthcare stocks [3] - The market structure has improved recently, with hedge funds and some long-term investors returning to the buying side after a sharp sell-off due to rapid tariff increases by the U.S. [3] Group 3 - Hedge funds are currently more inclined to participate in the stock market rebound, but the "recession alert" has not been lifted, indicating that recent purchases are primarily for short covering rather than strong bullish sentiment [5] - Trend-following CTAs, risk-parity, and volatility control funds have significantly reduced their stock exposure, with expectations of asset reallocation to support the rebound, though this support is limited by the need for lower volatility and market stabilization [5] Group 4 - Recent client feedback indicates a hesitance to "follow new news," with buying behavior resembling "trial balloons" rather than a genuine trend reversal [7] - Market sentiment has shifted from panic risks to chronic risks, making it difficult to find "consensus trades" [7] - Two potential themes are emerging: capital is flowing out of U.S. stocks into other international markets, and there is a search for severely beaten-down stocks with the highest potential returns [7] Group 5 - JPMorgan's market intelligence team maintains a constructive view on international equities tactically, noting that while risks have receded and the holding environment is relatively favorable, the market has not yet emerged from its troubles [8]