Quantitative Factors and Construction Methods Factor Name: BP - Construction Idea: Current net asset divided by current total market value[13] - Construction Process: $ BP = \frac{Current \ Net \ Asset}{Current \ Total \ Market \ Value} $[13] Factor Name: BP Three-Year Percentile - Construction Idea: Stock's current BP in the last three years percentile[13] - Construction Process: $ BP \ Three-Year \ Percentile = \frac{Current \ BP}{BP \ in \ Last \ Three \ Years} $[13] Factor Name: Quarterly EP - Construction Idea: Quarterly net profit divided by net asset[13] - Construction Process: $ Quarterly \ EP = \frac{Quarterly \ Net \ Profit}{Net \ Asset} $[13] Factor Name: Quarterly EP One-Year Percentile - Construction Idea: Stock's current quarterly EP in the last one year percentile[13] - Construction Process: $ Quarterly \ EP \ One-Year \ Percentile = \frac{Current \ Quarterly \ EP}{Quarterly \ EP \ in \ Last \ One \ Year} $[13] Factor Name: Quarterly SP - Construction Idea: Quarterly operating income divided by net asset[13] - Construction Process: $ Quarterly \ SP = \frac{Quarterly \ Operating \ Income}{Net \ Asset} $[13] Factor Name: Quarterly SP One-Year Percentile - Construction Idea: Stock's current quarterly SP in the last one year percentile[13] - Construction Process: $ Quarterly \ SP \ One-Year \ Percentile = \frac{Current \ Quarterly \ SP}{Quarterly \ SP \ in \ Last \ One \ Year} $[13] Factor Name: Quarterly Asset Turnover Rate - Construction Idea: Quarterly operating income divided by total asset[13] - Construction Process: $ Quarterly \ Asset \ Turnover \ Rate = \frac{Quarterly \ Operating \ Income}{Total \ Asset} $[13] Factor Name: Quarterly Gross Profit Margin - Construction Idea: Quarterly gross profit divided by quarterly sales income[13] - Construction Process: $ Quarterly \ Gross \ Profit \ Margin = \frac{Quarterly \ Gross \ Profit}{Quarterly \ Sales \ Income} $[13] Factor Name: Quarterly ROA - Construction Idea: Quarterly net profit divided by total asset[13] - Construction Process: $ Quarterly \ ROA = \frac{Quarterly \ Net \ Profit}{Total \ Asset} $[13] Factor Name: Quarterly ROE - Construction Idea: Quarterly net profit divided by net asset[13] - Construction Process: $ Quarterly \ ROE = \frac{Quarterly \ Net \ Profit}{Net \ Asset} $[13] Factor Name: Quarterly Net Profit Year-on-Year Growth - Construction Idea: Quarterly net profit year-on-year growth rate[13] - Construction Process: $ Quarterly \ Net \ Profit \ Year-on-Year \ Growth = \frac{Current \ Quarterly \ Net \ Profit - Last \ Year \ Quarterly \ Net \ Profit}{Last \ Year \ Quarterly \ Net \ Profit} $[13] Factor Name: Quarterly Revenue Year-on-Year Growth - Construction Idea: Quarterly revenue year-on-year growth rate[13] - Construction Process: $ Quarterly \ Revenue \ Year-on-Year \ Growth = \frac{Current \ Quarterly \ Revenue - Last \ Year \ Quarterly \ Revenue}{Last \ Year \ Quarterly \ Revenue} $[13] Factor Name: Quarterly ROE Year-on-Year Growth - Construction Idea: Quarterly ROE year-on-year growth rate[13] - Construction Process: $ Quarterly \ ROE \ Year-on-Year \ Growth = \frac{Current \ Quarterly \ ROE - Last \ Year \ Quarterly \ ROE}{Last \ Year \ Quarterly \ ROE} $[13] Factor Name: Standardized Unexpected Earnings - Construction Idea: Current quarterly net profit minus the average quarterly net profit growth rate of the past eight quarters divided by the standard deviation of the quarterly net profit growth rate of the past eight quarters[13] - Construction Process: $ Standardized \ Unexpected \ Earnings = \frac{Current \ Quarterly \ Net \ Profit - (Last \ Year \ Quarterly \ Net \ Profit + Average \ Quarterly \ Net \ Profit \ Growth \ Rate \ of \ Past \ Eight \ Quarters)}{Standard \ Deviation \ of \ Quarterly \ Net \ Profit \ Growth \ Rate \ of \ Past \ Eight \ Quarters} $[13] Factor Name: Standardized Unexpected Revenue - Construction Idea: Current quarterly revenue minus the average quarterly revenue growth rate of the past eight quarters divided by the standard deviation of the quarterly revenue growth rate of the past eight quarters[13] - Construction Process: $ Standardized \ Unexpected \ Revenue = \frac{Current \ Quarterly \ Revenue - (Last \ Year \ Quarterly \ Revenue + Average \ Quarterly \ Revenue \ Growth \ Rate \ of \ Past \ Eight \ Quarters)}{Standard \ Deviation \ of \ Quarterly \ Revenue \ Growth \ Rate \ of \ Past \ Eight \ Quarters} $[13] Factor Name: Dividend Yield - Construction Idea: Recent annual dividend divided by current market value[13] - Construction Process: $ Dividend \ Yield = \frac{Recent \ Annual \ Dividend}{Current \ Market \ Value} $[13] Factor Name: Performance Forecast Accuracy - Construction Idea: Single quarter performance forecast upper limit minus single quarter performance forecast lower limit divided by the average of the single quarter performance forecast upper limit and lower limit multiplied by -1[13] - Construction Process: $ Performance \ Forecast \ Accuracy = \frac{Single \ Quarter \ Performance \ Forecast \ Upper \ Limit - Single \ Quarter \ Performance \ Forecast \ Lower \ Limit}{(Single \ Quarter \ Performance \ Forecast \ Upper \ Limit + Single \ Quarter \ Performance \ Forecast \ Lower \ Limit)/2} \times (-1) $[13] Factor Name: Top Five Shareholders' Holding Ratio Sum - Construction Idea: Sum of the squares of the top five shareholders' holding ratios[13] - Construction Process: $ Top \ Five \ Shareholders' \ Holding \ Ratio \ Sum = \sum_{i=1}^{5} (Holding \ Ratio_i)^2 $[13] Factor Name: 90-Day Analyst Coverage - Construction Idea: Analyst coverage in the past 90 days[13] - Construction Process: $ 90-Day \ Analyst \ Coverage = \frac{Number \ of \ Analysts \ Covering \ the \ Stock \ in \ the \ Past \ 90 \ Days}{Total \ Number \ of \ Analysts} $[13] Factor Name: Consensus Expected Net Profit Compound Growth Rate - Construction Idea: Consensus expected net profit three-year compound growth rate[13] - Construction Process: $ Consensus \ Expected \ Net \ Profit \ Compound \ Growth \ Rate = \frac{Consensus \ Expected \ Net \ Profit \ in \ Three \ Years}{Current \ Net \ Profit} $[13] Factor Name: Consensus Expected EPS Change - Construction Idea: Consensus expected EPS divided by the average consensus expected EPS in the last 120 days[13] - Construction Process: $ Consensus \ Expected \ EPS \ Change = \frac{Consensus \ Expected \ EPS}{Average \ Consensus \ Expected \ EPS \ in \ the \ Last \ 120 \ Days} $[13] Factor Name: 90-Day Net Upward Revision Ratio - Construction Idea: Ratio of analysts who revised earnings forecasts upward minus the ratio of analysts who revised earnings forecasts downward in the past 90 days[13] - Construction Process: $ 90-Day \ Net \ Upward \ Revision \ Ratio = \frac{Number \ of \ Analysts \ Revising \ Upward}{Total \ Number \ of \ Analysts} - \frac{Number \ of \ Analysts \ Revising \ Downward}{Total \ Number \ of \ Analysts} $[13] Factor Name: 90-Day Expected Adjustment Mean - Construction Idea: Average adjustment magnitude of analysts' earnings forecasts in the past 90 days[13] - Construction Process: $ 90-Day \ Expected \ Adjustment \ Mean = \frac{Sum \ of \ Analysts' \ Earnings \ Forecast \ Adjustments \ in \ the \ Past \ 90 \ Days}{Total \ Number \ of \ Analysts} $[13] Factor Name: Financial Report Exceeding Research Report Expectation Degree - Construction Idea: Degree to which the financial report exceeds the research report expectation within 5 days of the financial report release[13] - Construction Process: $ Financial \ Report \ Exceeding \ Research \ Report \ Expectation \ Degree = \frac{Financial \ Report \ Value - Research \ Report \ Expectation}{Research \ Report \ Expectation} $[13] Factor Name: Standardized Unexpected Earnings Based on Consensus Expectation - Construction Idea: Quarterly net profit minus quarterly consensus expected net profit divided by the consensus expected net profit dispersion[13] - Construction Process: $ Standardized \ Unexpected \ Earnings \ Based \ on \ Consensus \ Expectation = \frac{Quarterly \ Net \ Profit - Quarterly \ Consensus \ Expected \ Net \ Profit}{Consensus \ Expected \ Net \ Profit \ Dispersion} $[13] Factor Name: 1-Month Turnover Rate and Average Price Correlation - Construction Idea: Correlation coefficient between stock turnover rate and average price in the past 20 trading days[13] - Construction Process: $ 1-Month \ Turnover \ Rate \ and \ Average \ Price \ Correlation = \frac{Cov(Turnover \ Rate, \ Average \ Price)}{Std(Turnover \ Rate)

Quantitative Factors and Construction Methods Factor Name: BP (Book-to-Price Ratio) - **Construction Idea**: Measures the valuation of a stock by comparing its book value to its market value [13] - **Construction Process**: - Formula: $ BP = \frac{\text{Current Book Value}}{\text{Current Market Value}} $ [13] Factor Name: BP Three-Year Percentile - **Construction Idea**: Evaluates the relative valuation of a stock over the past three years [13] - **Construction Process**: - Formula: BP Three-Year Percentile = Percentile rank of the current BP within the last three years [13] Factor Name: Quarterly EP (Earnings-to-Price Ratio) - **Construction Idea**: Measures the profitability of a stock relative to its market price [13] - **Construction Process**: - Formula: $ \text{Quarterly EP} = \frac{\text{Quarterly Net Profit}}{\text{Net Assets}} $ [13] Factor Name: Quarterly EP One-Year Percentile - **Construction Idea**: Tracks the relative profitability of a stock over the past year [13] - **Construction Process**: - Formula: Quarterly EP One-Year Percentile = Percentile rank of the current Quarterly EP within the last year [13] Factor Name: Quarterly SP (Sales-to-Price Ratio) - **Construction Idea**: Measures the revenue generation capability of a stock relative to its market price [13] - **Construction Process**: - Formula: $ \text{Quarterly SP} = \frac{\text{Quarterly Revenue}}{\text{Net Assets}} $ [13] Factor Name: Quarterly SP One-Year Percentile - **Construction Idea**: Tracks the relative revenue generation capability of a stock over the past year [13] - **Construction Process**: - Formula: Quarterly SP One-Year Percentile = Percentile rank of the current Quarterly SP within the last year [13] Factor Name: Small Market Cap - **Construction Idea**: Captures the size effect by focusing on smaller companies [13] - **Construction Process**: - Formula: $ \text{Small Market Cap} = \log(\text{Market Capitalization}) $ [13] Factor Name: 1-Month Reversal - **Construction Idea**: Captures the short-term reversal effect in stock prices [13] - **Construction Process**: - Formula: $ \text{1-Month Reversal} = \text{Cumulative Return over the Last 20 Trading Days} $ [13] Factor Name: Fama-French Three-Factor 1-Month Residual Volatility - **Construction Idea**: Measures the idiosyncratic risk of a stock based on the Fama-French three-factor model [13] - **Construction Process**: - Formula: $ \text{Residual Volatility} = \text{Standard Deviation of Residuals from Fama-French Three-Factor Regression over the Last 20 Trading Days} $ [13] --- Factor Backtesting Results IC Performance - **BP**: Weekly IC = -4.17%, Monthly IC = 0.88%, Yearly IC = 1.86%, Historical IC = 2.19% [9] - **BP Three-Year Percentile**: Weekly IC = -1.08%, Monthly IC = -0.99%, Yearly IC = 2.58%, Historical IC = 1.58% [9] - **Quarterly EP**: Weekly IC = 2.10%, Monthly IC = -0.48%, Yearly IC = -0.46%, Historical IC = 1.18% [9] - **Quarterly EP One-Year Percentile**: Weekly IC = 4.23%, Monthly IC = 3.81%, Yearly IC = 0.98%, Historical IC = 1.73% [9] - **Quarterly SP**: Weekly IC = 0.79%, Monthly IC = 0.93%, Yearly IC = 0.53%, Historical IC = 0.74% [9] - **Quarterly SP One-Year Percentile**: Weekly IC = 4.80%, Monthly IC = 2.82%, Yearly IC = 2.87%, Historical IC = 1.83% [9] - **Small Market Cap**: Weekly IC = 10.49%, Monthly IC = 8.17%, Yearly IC = 3.61%, Historical IC = 2.05% [9] - **1-Month Reversal**: Weekly IC = 7.22%, Monthly IC = 1.22%, Yearly IC = 3.40%, Historical IC = 2.22% [9] - **Fama-French Three-Factor 1-Month Residual Volatility**: Weekly IC = 3.60%, Monthly IC = 1.11%, Yearly IC = 3.49%, Historical IC = 2.48% [9] Excess Return Performance (Long-Only Portfolio) - **BP**: Weekly Excess Return = -0.83%, Monthly Excess Return = -1.04%, Yearly Excess Return = 3.02%, Historical Cumulative Excess Return = 28.90% [11] - **BP Three-Year Percentile**: Weekly Excess Return = -0.58%, Monthly Excess Return = -1.51%, Yearly Excess Return = 0.97%, Historical Cumulative Excess Return = -3.21% [11] - **Quarterly EP**: Weekly Excess Return = 0.57%, Monthly Excess Return = 1.10%, Yearly Excess Return = 1.44%, Historical Cumulative Excess Return = 30.83% [11] - **Quarterly EP One-Year Percentile**: Weekly Excess Return = -0.01%, Monthly Excess Return = 0.51%, Yearly Excess Return = 3.23%, Historical Cumulative Excess Return = 34.69% [11] - **Quarterly SP**: Weekly Excess Return = -0.01%, Monthly Excess Return = 0.49%, Yearly Excess Return = 0.70%, Historical Cumulative Excess Return = -2.69% [11] - **Quarterly SP One-Year Percentile**: Weekly Excess Return = 0.09%, Monthly Excess Return = 1.25%, Yearly Excess Return = 7.91%, Historical Cumulative Excess Return = 2.23% [11] - **Small Market Cap**: Weekly Excess Return = 0.96%, Monthly Excess Return = 2.76%, Yearly Excess Return = 18.31%, Historical Cumulative Excess Return = 62.57% [11] - **1-Month Reversal**: Weekly Excess Return = 0.83%, Monthly Excess Return = 0.76%, Yearly Excess Return = 3.54%, Historical Cumulative Excess Return = 1.57% [11] - **Fama-French Three-Factor 1-Month Residual Volatility**: Weekly Excess Return = 0.28%, Monthly Excess Return = 0.75%, Yearly Excess Return = 8.69%, Historical Cumulative Excess Return = 18.67% [11]

Quantitative Factors and Construction Methods Factor Name: Small Market Capitalization - **Factor Construction Idea**: This factor captures the size effect, where smaller market capitalization stocks tend to outperform larger ones over time [8][10] - **Factor Construction Process**: The factor is calculated as the logarithm of the market capitalization of a stock [15] - **Factor Evaluation**: This factor performed well in the recent week, month, and year, indicating its robustness in capturing the size premium [8][10] Factor Name: 90-Day Analyst Coverage - **Factor Construction Idea**: Measures the level of analyst attention a stock receives, with higher coverage potentially indicating better information availability [8][14] - **Factor Construction Process**: The factor is calculated as the number of analysts covering the stock over the past 90 days [14] - **Factor Evaluation**: This factor showed strong performance in the recent week and month, though its annual performance was weaker [8][10] Factor Name: Turnover Rate Volatility (1-Month) - **Factor Construction Idea**: Captures the stability of trading activity, with higher volatility potentially indicating speculative behavior [8][10] - **Factor Construction Process**: The factor is calculated as the standard deviation of daily turnover rates over the past 20 trading days [14] - **Factor Evaluation**: This factor performed poorly in the recent week and month but showed strong performance over the past year [8][10] Factor Name: Fama-French 3-Factor 1-Month Residual Volatility - **Factor Construction Idea**: Measures the idiosyncratic risk of a stock after accounting for market, size, and value factors [8][14] - **Factor Construction Process**: The factor is calculated as the standard deviation of residuals from a regression of daily returns on the Fama-French 3 factors over the past 20 trading days [14] - **Factor Evaluation**: This factor exhibited weak performance in the recent week and month but performed well over the past year [8][10] Factor Name: 1-Month Reversal - **Factor Construction Idea**: Captures the short-term mean-reversion effect, where stocks with recent underperformance tend to rebound [8][14] - **Factor Construction Process**: The factor is calculated as the cumulative return over the past 20 trading days [14] - **Factor Evaluation**: This factor performed well in the recent month but showed weaker performance in the recent week and year [8][10] Factor Name: Quarterly Asset Turnover - **Factor Construction Idea**: Measures the efficiency of a company in utilizing its assets to generate revenue [10][14] - **Factor Construction Process**: The factor is calculated as quarterly revenue divided by total assets [14] - **Factor Evaluation**: This factor showed strong performance in the recent week, month, and year, indicating its effectiveness in capturing operational efficiency [10][14] Factor Name: Quarterly ROE YoY Growth - **Factor Construction Idea**: Captures the growth in return on equity (ROE) compared to the same quarter in the previous year, reflecting profitability improvement [10][14] - **Factor Construction Process**: The factor is calculated as the year-over-year growth rate of quarterly ROE [14] - **Factor Evaluation**: This factor performed well across all time horizons, showcasing its robustness in identifying growth opportunities [10][14] --- Factor Backtesting Results Small Market Capitalization - Weekly Excess Return: 1.03% - Monthly Excess Return: 3.94% - Annual Excess Return: 13.73% [11] 90-Day Analyst Coverage - Weekly Excess Return: 0.19% - Monthly Excess Return: -0.01% - Annual Excess Return: -3.00% [11] Turnover Rate Volatility (1-Month) - Weekly Excess Return: -0.51% - Monthly Excess Return: 1.19% - Annual Excess Return: 10.21% [11] Fama-French 3-Factor 1-Month Residual Volatility - Weekly Excess Return: -0.27% - Monthly Excess Return: 0.59% - Annual Excess Return: 7.33% [11] 1-Month Reversal - Weekly Excess Return: -0.28% - Monthly Excess Return: 1.90% - Annual Excess Return: 1.41% [11] Quarterly Asset Turnover - Weekly Excess Return: 0.55% - Monthly Excess Return: 1.39% - Annual Excess Return: 2.78% [11] Quarterly ROE YoY Growth - Weekly Excess Return: 0.36% - Monthly Excess Return: 0.95% - Annual Excess Return: 3.98% [11]