Quantitative Models and Construction 1. Model Name: Odds + Win Rate Strategy - **Model Construction Idea**: This strategy combines the risk budget of the odds-based strategy and the win-rate-based strategy to create a comprehensive scoring system for asset allocation[3][48][54] - **Model Construction Process**: 1. The odds-based strategy allocates more to high-odds assets and less to low-odds assets under a target volatility constraint[48] 2. The win-rate-based strategy derives macro win-rate scores from five factors: monetary, credit, growth, inflation, and overseas, and allocates accordingly[51] 3. The combined strategy sums the risk budgets of the two strategies to form a unified allocation model[54] - **Model Evaluation**: The model demonstrates stable performance with low drawdowns and consistent returns over different time periods[54] 2. Model Name: Industry Rotation Strategy - **Model Construction Idea**: This strategy evaluates industries based on three dimensions: momentum/trend, turnover/volatility/beta (crowding), and IR (information ratio) over the past 12 months[43] - **Model Construction Process**: 1. Momentum and trend are measured using the IR of industries over the past 12 months[43] 2. Crowding is assessed using turnover ratio, volatility ratio, and beta ratio[43] 3. The strategy ranks industries based on these metrics and allocates to those with strong trends, low crowding, and high IR[43] - **Model Evaluation**: The strategy has shown strong excess returns and low tracking errors, making it a robust framework for industry allocation[43] --- Model Backtesting Results 1. Odds + Win Rate Strategy - **Annualized Return**: - 2011 onwards: 7.0% - 2014 onwards: 7.6% - 2019 onwards: 7.2%[54] - **Maximum Drawdown**: - 2011 onwards: 2.8% - 2014 onwards: 2.7% - 2019 onwards: 2.8%[54] - **Sharpe Ratio**: - 2011 onwards: 2.86 - 2014 onwards: 3.26 - 2019 onwards: 2.85[56] 2. Industry Rotation Strategy - **Excess Return**: - 2011 onwards: 13.1% - 2014 onwards: 13.0% - 2019 onwards: 10.8%[44] - **Tracking Error**: - 2011 onwards: 11.0% - 2014 onwards: 12.0% - 2019 onwards: 10.7%[44] - **IR**: - 2011 onwards: 1.18 - 2014 onwards: 1.08 - 2019 onwards: 1.02[44] --- Quantitative Factors and Construction 1. Factor Name: Value Factor - **Factor Construction Idea**: Measures stocks with strong trends, low crowding, and moderate odds[27] - **Factor Construction Process**: 1. Trend is measured at zero standard deviation[27] 2. Odds are at 0.3 standard deviation[27] 3. Crowding is at -1.3 standard deviation[27] - **Factor Evaluation**: The factor ranks highest among all style factors, making it a key focus for allocation[27] 2. Factor Name: Quality Factor - **Factor Construction Idea**: Focuses on high odds, weak trends, and low crowding, with potential for future trend confirmation[29] - **Factor Construction Process**: 1. Odds are at 1.7 standard deviation[29] 2. Trend is at -1.4 standard deviation[29] 3. Crowding is at -0.8 standard deviation[29] - **Factor Evaluation**: The factor shows left-side buy signals but requires trend confirmation for stronger allocation[29] 3. Factor Name: Growth Factor - **Factor Construction Idea**: Represents high odds, moderate trends, and moderate crowding, suitable for standard allocation[32] - **Factor Construction Process**: 1. Odds are at 0.9 standard deviation[32] 2. Trend is at -0.2 standard deviation[32] 3. Crowding is at 0.1 standard deviation[32] - **Factor Evaluation**: The factor is recommended for standard allocation due to its balanced characteristics[32] 4. Factor Name: Small-Cap Factor - **Factor Construction Idea**: Characterized by low odds, strong trends, and high crowding, with high uncertainty[35] - **Factor Construction Process**: 1. Odds are at -0.7 standard deviation[35] 2. Trend is at 1.6 standard deviation[35] 3. Crowding is at 0.6 standard deviation[35] - **Factor Evaluation**: The factor is not recommended due to its high uncertainty and crowding[35] --- Factor Backtesting Results 1. Value Factor - **Odds**: 0.3 standard deviation - **Trend**: 0 standard deviation - **Crowding**: -1.3 standard deviation[27] 2. Quality Factor - **Odds**: 1.7 standard deviation - **Trend**: -1.4 standard deviation - **Crowding**: -0.8 standard deviation[29] 3. Growth Factor - **Odds**: 0.9 standard deviation - **Trend**: -0.2 standard deviation - **Crowding**: 0.1 standard deviation[32] 4. Small-Cap Factor - **Odds**: -0.7 standard deviation - **Trend**: 1.6 standard deviation - **Crowding**: 0.6 standard deviation[35]

Quantitative Models and Construction 1. Model Name: Odds Ratio + Win Rate Strategy - **Model Construction Idea**: This strategy combines the odds ratio and win rate metrics to allocate risk budgets across assets, aiming to optimize returns under historical data constraints [3][46] - **Model Construction Process**: - The odds ratio and win rate metrics are calculated for each asset based on historical data - The risk budgets derived from these two metrics are summed to form a composite score - Asset allocation is determined by the composite score, with higher scores receiving higher allocations - Current allocation recommendation: 11.5% equities, 2.2% gold, 86.3% bonds [3][46] - **Model Evaluation**: The model demonstrates stable performance with low drawdowns, making it suitable for risk-averse investors [3][46] 2. Model Name: Odds Ratio Enhanced Strategy - **Model Construction Idea**: Focuses on maximizing returns by overweighting high-odds assets and underweighting low-odds assets under a volatility constraint [40][41] - **Model Construction Process**: - Odds ratios are calculated for each asset - A fixed volatility constraint is applied to ensure risk control - Asset allocation is adjusted dynamically based on odds ratios - Current allocation recommendation: 15.6% equities, 2.9% gold, 81.5% bonds [40][41] - **Model Evaluation**: The strategy effectively balances risk and return, achieving consistent performance over time [40][41] 3. Model Name: Win Rate Enhanced Strategy - **Model Construction Idea**: Utilizes macroeconomic factors (e.g., monetary policy, credit, growth, inflation, and overseas conditions) to derive win rate scores for asset allocation [43][44] - **Model Construction Process**: - Win rate scores are calculated based on macroeconomic indicators - Asset allocation is determined by the win rate scores, favoring assets with higher scores - Current allocation recommendation: 6.6% equities, 1.7% gold, 91.7% bonds [43][44] - **Model Evaluation**: The strategy is robust in capturing macroeconomic trends, providing a defensive allocation approach [43][44] --- Model Backtesting Results 1. Odds Ratio + Win Rate Strategy - Annualized Return: 7.0% (2011–2025), 7.6% (2014–2025), 7.2% (2019–2025) - Maximum Drawdown: 2.8% (2011–2025), 2.7% (2014–2025), 2.8% (2019–2025) - Sharpe Ratio: 2.86 (2011–2025), 3.26 (2014–2025), 2.85 (2019–2025) [3][46][47] 2. Odds Ratio Enhanced Strategy - Annualized Return: 6.6% (2011–2025), 7.5% (2014–2025), 7.0% (2019–2025) - Maximum Drawdown: 3.0% (2011–2025), 2.4% (2014–2025), 2.4% (2019–2025) - Sharpe Ratio: 2.72 (2011–2025), 3.19 (2014–2025), 3.02 (2019–2025) [40][41][42] 3. Win Rate Enhanced Strategy - Annualized Return: 7.0% (2011–2025), 7.7% (2014–2025), 6.3% (2019–2025) - Maximum Drawdown: 2.8% (2011–2025), 2.3% (2014–2025), 2.3% (2019–2025) - Sharpe Ratio: 2.96 (2011–2025), 3.36 (2014–2025), 2.87 (2019–2025) [43][44][45] --- Quantitative Factors and Construction 1. Factor Name: Value Factor - **Factor Construction Idea**: Measures the relative attractiveness of value stocks based on odds, trends, and crowding metrics [18][20] - **Factor Construction Process**: - Odds: 0.2 standard deviations (higher indicates cheaper valuation) - Trend: -0.1 standard deviations (moderate level) - Crowding: -1.0 standard deviations (low crowding) - Composite Score: 1.0 (highest among all factors) [18][20] - **Factor Evaluation**: Strong trend and low crowding make it a top-performing factor [18][20] 2. Factor Name: Quality Factor - **Factor Construction Idea**: Focuses on high-quality stocks with favorable odds and low crowding, awaiting trend confirmation [20][21] - **Factor Construction Process**: - Odds: 1.4 standard deviations (high level) - Trend: -0.3 standard deviations (weak level) - Crowding: -0.8 standard deviations (low level) - Composite Score: 0.6 [20][21] - **Factor Evaluation**: Promising long-term potential but requires trend confirmation for stronger performance [20][21] 3. Factor Name: Growth Factor - **Factor Construction Idea**: Targets growth stocks with improving odds and moderate crowding [23][25] - **Factor Construction Process**: - Odds: 0.6 standard deviations (moderate level) - Trend: 0.02 standard deviations (neutral level) - Crowding: -0.1 standard deviations (moderate level) - Composite Score: 0.4 [23][25] - **Factor Evaluation**: Suitable for neutral allocation due to balanced metrics [23][25] 4. Factor Name: Small-Cap Factor - **Factor Construction Idea**: Captures small-cap stocks with strong trends but high crowding and low odds [26][28] - **Factor Construction Process**: - Odds: -0.5 standard deviations (low level) - Trend: 0.9 standard deviations (high level) - Crowding: 0.6 standard deviations (high level) - Composite Score: 0.0 [26][28] - **Factor Evaluation**: High uncertainty due to low odds and high crowding, requiring cautious approach [26][28] --- Factor Backtesting Results 1. Value Factor - Odds: 0.2 standard deviations - Trend: -0.1 standard deviations - Crowding: -1.0 standard deviations - Composite Score: 1.0 [18][20] 2. Quality Factor - Odds: 1.4 standard deviations - Trend: -0.3 standard deviations - Crowding: -0.8 standard deviations - Composite Score: 0.6 [20][21] 3. Growth Factor - Odds: 0.6 standard deviations - Trend: 0.02 standard deviations - Crowding: -0.1 standard deviations - Composite Score: 0.4 [23][25] 4. Small-Cap Factor - Odds: -0.5 standard deviations - Trend: 0.9 standard deviations - Crowding: 0.6 standard deviations - Composite Score: 0.0 [26][28]

Quantitative Models and Construction 1. Model Name: AIAE Indicator for A-shares - **Model Construction Idea**: The AIAE indicator is used to measure the relative valuation of A-shares by comparing the total market capitalization of the CSI All Share Index with the sum of the total market capitalization and total entity debt[10] - **Model Construction Process**: The formula for the AIAE indicator is: $ AIAE = \frac{\text{CSI All Share Total Market Cap}}{\text{CSI All Share Total Market Cap} + \text{Total Entity Debt}} $ As of the end of May, the AIAE indicator for A-shares was 16%, which is at the 35th percentile since 2010, indicating relatively high valuation attractiveness[10] - **Model Evaluation**: The indicator suggests that A-shares still have high payoff potential, though the win rate remains moderate due to macroeconomic uncertainties[10] 2. Model Name: Bond Payoff Indicator - **Model Construction Idea**: This indicator is derived from the expected return spread between long-term and short-term bonds to assess the valuation risk of bonds[11] - **Model Construction Process**: The bond payoff indicator is calculated based on the expected return difference between long-term and short-term bonds. Currently, the indicator is at -2.1 standard deviations, indicating extremely low valuation levels and potential risks in long-term bonds[11] - **Model Evaluation**: The indicator highlights valuation risks in long-term bonds, though the win rate has improved due to monetary easing and weak credit conditions[11] 3. Model Name: Federal Reserve Liquidity Index - **Model Construction Idea**: This index combines quantity and price dimensions to measure the liquidity provided by the Federal Reserve[18] - **Model Construction Process**: The Federal Reserve Liquidity Index is constructed by integrating multiple factors, including net liquidity, credit support, market expectations, and announcement surprises. Currently, the index is at the 20th percentile, indicating relatively loose liquidity conditions[18] - **Model Evaluation**: The index suggests that liquidity conditions are supportive, but potential shifts in Federal Reserve policy could alter the outlook[18] --- Quantitative Factors and Construction 1. Factor Name: Quality Factor - **Factor Construction Idea**: The quality factor is evaluated based on its payoff, trend, and crowding levels, with a focus on long-term stability[19] - **Factor Construction Process**: - Payoff: Currently at 1.3 standard deviations, indicating attractive valuation - Trend: At -0.3 standard deviations, suggesting moderate momentum - Crowding: At -0.8 standard deviations, reflecting low crowding levels The comprehensive score for the quality factor is 2.4, making it a high-priority allocation[19] - **Factor Evaluation**: The factor is attractive for long-term investment due to its favorable valuation and low crowding[19] 2. Factor Name: Growth Factor - **Factor Construction Idea**: The growth factor is assessed based on its valuation, trend, and crowding, with a focus on growth potential[21] - **Factor Construction Process**: - Payoff: At -1.9 standard deviations, indicating low valuation attractiveness - Trend: At 0.4 standard deviations, suggesting moderate momentum - Crowding: At 0.3 standard deviations, reflecting moderate crowding The comprehensive score for the growth factor is -1.6, indicating low allocation value[21] - **Factor Evaluation**: The factor is less attractive due to its low valuation and moderate crowding[21] 3. Factor Name: Dividend Factor - **Factor Construction Idea**: The dividend factor is evaluated for its income-generating potential and stability[24] - **Factor Construction Process**: - Payoff: At 0.02 standard deviations, indicating neutral valuation - Trend: At -1.8 standard deviations, suggesting weak momentum - Crowding: At -1.2 standard deviations, reflecting low crowding The comprehensive score for the dividend factor is 0, indicating no significant allocation value[24] - **Factor Evaluation**: The factor lacks strong investment appeal due to weak momentum and neutral valuation[24] 4. Factor Name: Small-cap Factor - **Factor Construction Idea**: The small-cap factor is assessed for its potential to outperform based on size and market dynamics[26] - **Factor Construction Process**: - Payoff: At -0.3 standard deviations, indicating neutral valuation - Trend: At 0.4 standard deviations, suggesting moderate momentum - Crowding: At 0.5 standard deviations, reflecting moderate crowding The comprehensive score for the small-cap factor is 0, indicating high uncertainty[26] - **Factor Evaluation**: The factor is not recommended due to its high uncertainty and moderate crowding[26] --- Backtesting Results for Models 1. AIAE Indicator for A-shares - Current value: 16% - Percentile since 2010: 35%[10] 2. Bond Payoff Indicator - Current value: -2.1 standard deviations[11] 3. Federal Reserve Liquidity Index - Current value: 20th percentile[18] --- Backtesting Results for Factors 1. Quality Factor - Payoff: 1.3 standard deviations - Trend: -0.3 standard deviations - Crowding: -0.8 standard deviations - Comprehensive Score: 2.4[19] 2. Growth Factor - Payoff: -1.9 standard deviations - Trend: 0.4 standard deviations - Crowding: 0.3 standard deviations - Comprehensive Score: -1.6[21] 3. Dividend Factor - Payoff: 0.02 standard deviations - Trend: -1.8 standard deviations - Crowding: -1.2 standard deviations - Comprehensive Score: 0[24] 4. Small-cap Factor - Payoff: -0.3 standard deviations - Trend: 0.4 standard deviations - Crowding: 0.5 standard deviations - Comprehensive Score: 0[26]