Quantitative Models and Construction Methods 1. Model Name: Volume Timing Signal - **Model Construction Idea**: The core idea is that "the decline in a shrinking volume market is significantly greater than the rise in a shrinking volume market, so avoiding shrinking volume signals can achieve higher trading odds"[3][22][24] - **Model Construction Process**: 1. Calculate the rolling 60-day average and standard deviation of the turnover and turnover rate of the index or market[23] 2. Standardize the daily turnover data: - If the turnover is within ±2 standard deviations, map the score to -1~+1 - If the turnover exceeds ±2 standard deviations, assign a score of +1/-1 3. Combine the scores of turnover and turnover rate equally[23] 4. Generate signals based on the combined score: - Method 1: Go long if the score > 0, stay out if the score < 0 - Method 2: Use the rolling 5-year or 3-year percentile of the score; go long if above the 50th percentile, stay out if below[23] 5. The report adopts the simpler method of directly judging whether the score is greater than 0[23] - **Model Evaluation**: The model is not a high-win-rate strategy but achieves relatively high odds by avoiding significant market adjustments during shrinking volume periods[24] 2. Model Name: Growth-Value Style Rotation Model - **Model Construction Idea**: The model evaluates the relative attractiveness of growth and value styles based on macroeconomic cycles, valuation differences, and market sentiment[52][54] - **Model Construction Process**: 1. **Fundamentals**: - Growth is favored when the profit cycle slope is steep, interest rate levels are low, and the credit cycle is rising - Value is favored under the opposite conditions[52] 2. **Valuation**: - Growth is favored when the PE and PB valuation differences between growth and value are in the lower percentiles and mean-reverting upward[52] 3. **Sentiment**: - Growth is favored when turnover and volatility differences between growth and value are low[52] 4. Combine signals from fundamentals, valuation, and sentiment to determine the allocation between growth and value[52] - **Model Evaluation**: The model has shown significant improvement over the benchmark in terms of annualized returns and risk-adjusted performance[53][55] 3. Model Name: Small-Cap vs. Large-Cap Style Rotation Model - **Model Construction Idea**: The model evaluates the relative attractiveness of small-cap and large-cap styles based on macroeconomic cycles, valuation differences, and market sentiment[56][58] - **Model Construction Process**: 1. **Fundamentals**: - Small-cap is favored when the profit cycle slope is steep, interest rate levels are low, and the credit cycle is rising - Large-cap is favored under the opposite conditions[56] 2. **Valuation**: - Large-cap is favored when the PE and PB valuation differences between small-cap and large-cap are in the higher percentiles and mean-reverting downward[56] 3. **Sentiment**: - Small-cap is favored when turnover differences are high - Large-cap is favored when volatility differences are mean-reverting downward[56] 4. Combine signals from fundamentals, valuation, and sentiment to determine the allocation between small-cap and large-cap[56] - **Model Evaluation**: The model has shown significant improvement over the benchmark in terms of annualized returns and risk-adjusted performance[57][60] 4. Model Name: Four-Style Rotation Model - **Model Construction Idea**: Combines the conclusions of the growth-value and small-cap-large-cap rotation models to allocate across four styles: small-cap growth, small-cap value, large-cap growth, and large-cap value[61][63] - **Model Construction Process**: 1. Use the growth-value model to determine the allocation between growth and value 2. Use the small-cap-large-cap model to determine the allocation between small-cap and large-cap 3. Combine the two models to allocate across the four styles[61] - **Model Evaluation**: The model has shown significant improvement over the benchmark in terms of annualized returns and risk-adjusted performance, with consistent outperformance in most years[61][63] --- Model Backtest Results 1. Volume Timing Signal - **Win Rate**: 47.34%[24] - **Odds**: 1.75[24] - **Annualized Excess Return**: 6.87% (based on next-day open price)[34] - **Maximum Drawdown**: 31.40%[34] - **Return-to-Drawdown Ratio**: 0.4634[34] 2. Growth-Value Style Rotation Model - **Annualized Return**: 11.76%[55] - **Annualized Volatility**: 20.77%[55] - **Maximum Drawdown**: 43.07%[55] - **Sharpe Ratio**: 0.5438[55] - **Return-to-Drawdown Ratio**: 0.2731[55] 3. Small-Cap vs. Large-Cap Style Rotation Model - **Annualized Return**: 12.45%[60] - **Annualized Volatility**: 22.65%[60] - **Maximum Drawdown**: 50.65%[60] - **Sharpe Ratio**: 0.5441[60] - **Return-to-Drawdown Ratio**: 0.2459[60] 4. Four-Style Rotation Model - **Annualized Return**: 13.37%[63] - **Annualized Volatility**: 21.51%[63] - **Maximum Drawdown**: 47.91%[63] - **Sharpe Ratio**: 0.5988[63] - **Return-to-Drawdown Ratio**: 0.2790[63]