Core Viewpoint - The report explores whether the advantages of quantitative investment strategies can be sustained in the A-share market environment of 2026, highlighting the cyclical switching between "consensus" and "divergence" market conditions as a key determinant of strategy effectiveness [2][3][5]. Market Environment and Strategy Effectiveness - The A-share market is expected to enter a "central uplift platform period" after returning from historical lows, driven by the long-term trend of market institutionalization and the recovery of incremental funds, particularly from ETFs [3][38]. - The report identifies "institutional holding concentration" as a core indicator linking macro market patterns with micro Alpha sources, suggesting that increased concentration indicates a shift to "consensus" markets, while decreased concentration favors "divergence" markets [2][26][30]. Market Outlook for 2026 - The overall market environment for 2026 is assessed as optimistic, with a focus on structural opportunities due to attractive risk premiums and the absence of extreme overheating [4][44]. - The report anticipates a shift in investment strategies from capturing short-term opportunities in "divergence" markets to identifying core trends in "consensus" markets, particularly with the emergence of AI as a new investment theme [11][41]. Alpha Sources and Market Modes - The evolution of Alpha sources is linked to market modes, with "trading Alpha" being more effective in "divergence" markets and "cognitive Alpha" in "consensus" markets [17][25]. - "Trading Alpha" focuses on capturing short-term pricing inefficiencies, while "cognitive Alpha" emphasizes accurate predictions of future fundamentals [18][19]. Market Concentration Dynamics - High market concentration reflects a consensus-driven environment that rewards depth in research, while low concentration indicates a divergence-driven environment that favors breadth in strategy [27][28]. - The report constructs a market concentration index based on the top holdings of public funds, indicating stronger consensus when the index is high and greater divergence when it is low [30][31]. Investment Strategy Recommendations - In the anticipated "central uplift platform period," strategies that effectively combine depth (through alternative data and machine learning) with breadth (systematic capture of rotation opportunities) are expected to perform better [42][41]. - The report suggests that quantitative strategies may continue to outperform average active equity funds due to their ability to adapt to complex market conditions [42][43].

Summary of the Research Report on Quantitative Strategies and Market Outlook Industry Overview - The report focuses on the A-share market and the performance of quantitative investment strategies in 2026, analyzing the cyclical shifts between "consensus" and "divergence" market conditions [2][3][10]. Key Insights and Arguments 1. **Market Environment and Strategy Effectiveness**: - The A-share market exhibits cyclical shifts between "consensus" and "divergence" conditions, which significantly influence the effectiveness of different investment strategies, particularly between active and quantitative strategies [2][10]. - The transition from "divergence" to "consensus" markets alters the sources of excess returns (Alpha), shifting from "cognitive Alpha" (deep fundamental analysis) to "trading Alpha" (short-term pricing inefficiencies) [2][9][12]. 2. **Institutional Holding Concentration**: - The report introduces "institutional holding concentration" as a key indicator linking macro market patterns to micro Alpha sources. Increased concentration indicates a shift towards "consensus" markets, while decreased concentration suggests a "divergence" market [2][3][31]. 3. **Market Concentration Outlook**: - The market is expected to enter a "central uplift platform period" in 2026, characterized by a return to historical average concentration levels, supported by the long-term trend of market institutionalization and a resurgence of incremental funds, particularly from ETFs [3][48][49]. - However, valuation constraints may limit the rapid ascent of market concentration, as both large-cap and small-cap valuations are currently at historical highs [3][50]. 4. **Investment Strategy Performance**: - In the anticipated "complex mainline market," both traditional quantitative and active strategies will face challenges. Strategies that effectively combine "depth" (through alternative data and machine learning) and "breadth" (systematic capture of rotation opportunities) are expected to perform better [3][52]. - The report maintains a relatively optimistic outlook for quantitative strategies in 2026, predicting they will outperform the average of active equity funds [3][54]. 5. **Market Sentiment and Timing**: - The report expresses a mid-term optimistic view for the A-share market in 2026, supported by various indicators such as valuation levels, market sentiment, and capital flows, which do not indicate extreme overheating [4][54]. Additional Important Content - **Risk Factors**: - The analysis is based on historical data, which may not be reliably repeated, posing a risk to the predictions made [4]. - **Market Dynamics**: - The report highlights the importance of understanding market dynamics, particularly the transition from "cognitive" to "trading" Alpha, as a critical factor in determining the future effectiveness of quantitative strategies [9][30]. - **Valuation Metrics**: - The report discusses the valuation metrics of major indices, indicating that both large-cap (CSI 300) and small-cap (CSI 1000) indices are at high valuation percentiles, which may affect future capital flows and market concentration [45][50]. This comprehensive analysis provides insights into the evolving landscape of the A-share market and the implications for quantitative investment strategies moving forward.

Core Viewpoint - The report explores whether the advantages of quantitative investment strategies can be sustained in the A-share market environment of 2026, emphasizing the importance of market mode shifts between "consensus" and "divergence" markets in determining the effectiveness of different strategies [2]. Market Outlook - The company maintains a mid-term optimistic outlook for the A-share market in 2026, supported by various quantitative timing systems and technical indicators pointing to a healthy market environment [3][20]. - The style preference has shifted towards large-cap stocks, indicating a systemic change in the indicators affecting style returns [3][20]. Market Mode Shifts - The A-share market has shown distinct cyclical characteristics, alternating between "consensus" and "divergence" markets, which is crucial for assessing future strategy effectiveness [6]. - In the "consensus" phase (2017 and 2019-2021), investment strategies relied on deep research to identify core sectors and leading companies, favoring active management strategies [6]. - The "divergence" phase (2022 to mid-2025) saw a lack of consensus, leading to high-frequency switching among sectors, where quantitative strategies with systematic and diversified characteristics thrived [7]. Alpha Sources Transition - The evolution of market modes is accompanied by a shift in sources of excess returns (Alpha). In divergence markets, "trading Alpha" is predominant, focusing on capturing short-term pricing inefficiencies [11][12]. - In consensus markets, "cognitive Alpha" becomes more significant, emphasizing accurate predictions of future fundamentals and deep understanding of industry trends [12]. Market Concentration as an Indicator - Market concentration is identified as a key indicator for measuring market mode evolution and Alpha source transitions. Low concentration corresponds to divergence markets, rewarding breadth, while high concentration aligns with consensus markets, rewarding depth [13][14]. - The report predicts a return to a "central uplift platform period" for market concentration in 2026, following a recovery from historical lows [17][18]. Future Market Dynamics - The first phase of market concentration evolution is expected to see a return to historical median levels as AI themes gain acceptance, benefiting expert-driven active funds [17]. - The second phase is anticipated to enter a "weak equilibrium" platform oscillation in 2026, characterized by a dual-driven growth pattern from technology and traditional industries, which may limit rapid increases in institutional concentration [18]. Quantitative Strategy Advantages - In the anticipated "central uplift platform period," the complexity of the market may favor advanced quantitative strategies that can integrate depth (understanding main lines) and breadth (capturing rotations) [19].