Quantitative Models and Construction 1. Model Name: Three-Dimensional Timing Framework - **Model Construction Idea**: The model integrates three dimensions—divergence, liquidity, and prosperity—to assess market timing and provide investment recommendations[7][13] - **Model Construction Process**: 1. **Divergence**: Measures the degree of disagreement among market participants, reflecting the balance between bullish and bearish sentiments 2. **Liquidity**: Tracks the overall market liquidity trend, indicating the availability of funds in the market 3. **Prosperity**: Evaluates the economic and market growth momentum 4. The model combines these three indicators to generate a composite signal for market timing decisions, such as reducing positions during a "divergence up, liquidity down" scenario[7][13] - **Model Evaluation**: The model provides a systematic and multi-dimensional approach to market timing, offering insights into market trends and potential risks[7][13] --- Quantitative Factors and Construction 1. Factor Name: Size Factor - **Factor Construction Idea**: Captures the performance difference between large-cap and small-cap stocks[39] - **Factor Construction Process**: 1. Define the market capitalization of stocks 2. Construct portfolios based on size rankings 3. Measure the return spread between large-cap and small-cap portfolios[39] - **Factor Evaluation**: The size factor recorded a positive return of 1.57% in the past week, indicating that large-cap stocks outperformed small-cap stocks during this period[39][43] 2. Factor Name: Beta Factor - **Factor Construction Idea**: Measures the sensitivity of a stock's returns to market movements[40] - **Factor Construction Process**: 1. Calculate the beta of individual stocks using historical return data 2. Construct portfolios based on beta rankings 3. Measure the return spread between high-beta and low-beta portfolios[40] - **Factor Evaluation**: The beta factor achieved a return of 1.08% in the past week, suggesting that high-beta stocks outperformed low-beta stocks[40][43] 3. Factor Name: Growth Factor - **Factor Construction Idea**: Identifies stocks with high growth potential based on financial metrics[40] - **Factor Construction Process**: 1. Use metrics such as revenue growth, earnings growth, and other growth-related indicators 2. Construct portfolios based on growth rankings 3. Measure the return spread between high-growth and low-growth portfolios[40] - **Factor Evaluation**: The growth factor recorded a return of 0.42% in the past week, indicating that high-growth stocks slightly outperformed their low-growth counterparts[40][43] 4. Factor Name: Single-Quarter ROE YoY Difference (ROE_Q_Delta) - **Factor Construction Idea**: Measures the year-over-year change in return on equity (ROE) for a single quarter, reflecting profitability trends[46][47] - **Factor Construction Process**: 1. Calculate the ROE for the current quarter and the same quarter in the previous year 2. Compute the difference between the two values 3. Construct portfolios based on the ROE YoY difference rankings[46][47] - **Factor Evaluation**: This factor performed well across various indices, with a multi-week excess return of 8.23% in the CSI 300 index and 9.38% in the CSI 1000 index[46][47] 5. Factor Name: Revenue Growth YoY (YOY_OR) - **Factor Construction Idea**: Tracks the year-over-year growth in revenue, highlighting companies with strong top-line growth[42][44] - **Factor Construction Process**: 1. Calculate the revenue growth rate for the current period compared to the same period in the previous year 2. Construct portfolios based on revenue growth rankings 3. Measure the return spread between high-growth and low-growth portfolios[42][44] - **Factor Evaluation**: The factor achieved a weekly excess return of 2.14% and a monthly excess return of 6.48%, demonstrating strong performance in identifying growth opportunities[42][44] --- Backtesting Results of Models and Factors 1. Three-Dimensional Timing Framework - **Annualized Excess Return**: 13.5% since 2018 - **IR**: 1.7 - **Weekly Absolute Return**: 0.9% - **Weekly Excess Return**: -1% relative to equal-weighted industry benchmarks[35][38] 2. Size Factor - **Weekly Return**: 1.57% - **Monthly Return**: 4.70% - **Year-to-Date Return**: -29.21%[43] 3. Beta Factor - **Weekly Return**: 1.08% - **Monthly Return**: 2.99% - **Year-to-Date Return**: 27.49%[43] 4. Growth Factor - **Weekly Return**: 0.42% - **Monthly Return**: 4.11% - **Year-to-Date Return**: -3.28%[43] 5. Single-Quarter ROE YoY Difference (ROE_Q_Delta) - **Weekly Excess Return**: 8.23% (CSI 300), 9.38% (CSI 1000) - **Monthly Excess Return**: 10.17% (CSI 1000)[46][47] 6. Revenue Growth YoY (YOY_OR) - **Weekly Excess Return**: 2.14% - **Monthly Excess Return**: 6.48%[42][44]

Quantitative Models and Construction Timing Model: Three-Dimensional Timing Framework - **Model Name**: Three-Dimensional Timing Framework - **Construction Idea**: The model integrates liquidity, divergence, and prosperity indices to assess market timing opportunities. It aims to identify optimal investment periods by analyzing these three dimensions. [7][12][14] - **Construction Process**: 1. **Liquidity Index**: Tracks market liquidity trends using aggregated data from financial markets. 2. **Divergence Index**: Measures market disagreement or dispersion among participants. 3. **Prosperity Index**: Evaluates economic and market growth indicators. 4. Combine these indices into a unified framework to determine market timing signals. - **Evaluation**: The model has historically shown strong performance in identifying favorable market conditions. [7][12][14] Funds Flow Convergence Strategy - **Model Name**: Funds Flow Convergence Strategy - **Construction Idea**: Combines financing and large-order flows to identify industries with synchronized capital inflows. [28][31][33] - **Construction Process**: 1. **Financing Factor**: Defined as the net financing buy minus net financing sell, neutralized by Barra market capitalization factor. Calculated as the two-week change in the 50-day moving average. 2. **Large-Order Factor**: Measures net inflows based on industry transaction volume, neutralized by time series. Calculated using the 10-day moving average. 3. Combine the two factors, excluding extreme industries and large financial sectors, to enhance strategy stability. 4. Backtest results show annualized excess returns of 13.5% since 2018, with an IR of 1.7. [31][33] - **Evaluation**: The strategy demonstrates stable positive excess returns and lower drawdowns compared to other convergence strategies. [31][33] --- Quantitative Factors and Construction Style Factors - **Factor Name**: Value, Size, Volatility, Liquidity - **Construction Idea**: Style factors are constructed to capture specific market characteristics such as valuation, size, risk, and liquidity. [35][36] - **Construction Process**: 1. **Value Factor**: Measures the performance of low-valuation stocks relative to high-valuation stocks. 2. **Size Factor**: Tracks the performance of small-cap stocks versus large-cap stocks. 3. **Volatility Factor**: Compares low-volatility stocks to high-volatility stocks. 4. **Liquidity Factor**: Evaluates the performance of low-liquidity stocks against high-liquidity stocks. - **Evaluation**: Value factor recorded positive returns (+0.92%), while size (-0.21%), volatility (-2.38%), and liquidity (-2.23%) factors showed negative returns, reflecting market preferences for low-risk and low-liquidity stocks. [35][36] Alpha Factors - **Factor Name**: Momentum (mom_1y, mom_2y), Turnover Standard Rate (turnover_stdrate_1m, turnover_stdrate_3m), Analyst Forecast (ana_cov) - **Construction Idea**: Alpha factors aim to capture excess returns through predictive metrics such as price momentum, turnover rates, and analyst forecasts. [38][40] - **Construction Process**: 1. **Momentum Factors**: Measure stock returns over 1-year and 2-year periods. 2. **Turnover Standard Rate Factors**: Evaluate turnover rates over 1-month and 3-month periods. 3. **Analyst Forecast Factor**: Tracks the number of analyst forecasts over the past 90 trading days. - **Evaluation**: Momentum factors (mom_1y: +1.58%, mom_2y: +1.26%) and turnover factors (turnover_stdrate_1m: +1.30%, turnover_stdrate_3m: +1.56%) performed well, indicating strong predictive power. Analyst forecast factor (ana_cov: +1.22%) also showed positive returns. [38][40] Cross-Index Factors - **Factor Name**: PE_G, SUE, Turnover Standard Rate (turnover_stdrate_1m, turnover_stdrate_3m) - **Construction Idea**: These factors are designed to perform across different market indices, including large-cap and small-cap stocks. [41][42] - **Construction Process**: 1. **PE_G Factor**: Measures the difference between PE rankings and expected net profit growth rankings. 2. **SUE Factor**: Tracks net profit changes over the past eight quarters. 3. **Turnover Standard Rate Factors**: Evaluate turnover rates over 1-month and 3-month periods. - **Evaluation**: PE_G and SUE factors performed better in large-cap indices (e.g., HS300: PE_G +4.97%, SUE +4.09%) compared to small-cap indices (e.g., CN2000: PE_G +1.15%, SUE +1.34%). Turnover factors also showed higher returns in large-cap indices. [41][42] --- Backtesting Results Timing Model: Three-Dimensional Timing Framework - **Liquidity Index**: Positive trend observed - **Divergence Index**: Declining trend - **Prosperity Index**: Rising trend - **Overall Signal**: Full allocation recommended [7][12][14] Funds Flow Convergence Strategy - **Annualized Excess Return**: 13.5% - **IR**: 1.7 - **Weekly Excess Return**: +0.2% - **Absolute Weekly Return**: +2.8% [31][33] Style Factors - **Value**: +0.92% - **Size**: -0.21% - **Volatility**: -2.38% - **Liquidity**: -2.23% [35][36] Alpha Factors - **Momentum (mom_1y)**: +1.58% - **Momentum (mom_2y)**: +1.26% - **Turnover Standard Rate (turnover_stdrate_1m)**: +1.30% - **Turnover Standard Rate (turnover_stdrate_3m)**: +1.56% - **Analyst Forecast (ana_cov)**: +1.22% [38][40] Cross-Index Factors - **PE_G (HS300)**: +4.97% - **PE_G (CN2000)**: +1.15% - **SUE (HS300)**: +4.09% - **SUE (CN2000)**: +1.34% - **Turnover Standard Rate (turnover_stdrate_1m, HS300)**: +6.99% - **Turnover Standard Rate (turnover_stdrate_1m, CN2000)**: +0.02% [41][42]