Quantitative Models and Construction Methods - **Model Name**: Quantitative Market Trend Judgment Framework **Model Construction Idea**: The model aims to identify the dominant market style by comparing asset characteristics and prioritizing superior assets based on their intrinsic attributes. It incorporates a bottom-up quantitative approach to analyze the lifecycle of industries and their corresponding asset styles[6][10][17] **Model Construction Process**: 1. Define five asset style stages: external growth, quality growth, quality dividend, value dividend, and bankruptcy value[6] 2. Use a priority framework of $g > ROE > D$ to evaluate assets based on growth expectations, profitability, and dividend yield[6][7] 3. Compare mainstream assets (expected growth, actual growth, and profitability) and secondary assets (quality dividend, value dividend, and bankruptcy value) based on their crowding levels and fundamental factors[10][17] 4. Allocate industries using equal weights within each strategy, selecting five industries per strategy per period[17] **Model Evaluation**: The framework has demonstrated strong explanatory power for A-share market style rotations since 2009, achieving an annualized return of 27.81%[17] Quantitative Factors and Construction Methods - **Factor Name**: Expected Growth ($gf$) **Factor Construction Idea**: Measures the expected growth rate of industries based on analysts' forecasts, regardless of the lifecycle stage[7] **Factor Construction Process**: 1. Calculate the expected net profit growth rate ($g_{f,ttm}$) for each industry 2. Rank industries based on $g_{f,ttm}$ and select the top-performing ones[7][23] **Factor Evaluation**: The factor has shown consistent performance in identifying high-growth industries, with significant excess returns since 2019[37] - **Factor Name**: Actual Growth ($g$) **Factor Construction Idea**: Focuses on industries with the highest performance momentum ($\Delta g$), particularly during transition and growth phases[7] **Factor Construction Process**: 1. Calculate the actual net profit growth rate ($g_{ttm}$) for each industry 2. Identify industries with the highest $\Delta g$ values[7][27] **Factor Evaluation**: The factor has delivered strong excess returns in growth-dominated environments[38] - **Factor Name**: Profitability (ROE) **Factor Construction Idea**: Targets industries with high ROE and low valuation under the PB-ROE framework, focusing on mature phases[7] **Factor Construction Process**: 1. Calculate the PB-ROE residuals for each industry 2. Rank industries based on residuals and select the top-performing ones[7][41] **Factor Evaluation**: The factor performed well from 2016 to 2020 but weakened from 2021 to mid-2024[41] - **Factor Name**: Quality Dividend (DP+ROE) **Factor Construction Idea**: Combines dividend yield (DP) and ROE to identify high-quality industries, focusing on mature phases[7] **Factor Construction Process**: 1. Calculate DP and ROE for each industry 2. Combine the two metrics into a composite score and rank industries[7][44] **Factor Evaluation**: The factor has shown significant excess returns in 2016, 2017, and 2023[44] - **Factor Name**: Value Dividend (DP+BP) **Factor Construction Idea**: Combines dividend yield (DP) and book-to-price ratio (BP) to identify undervalued industries, focusing on mature phases[7] **Factor Construction Process**: 1. Calculate DP and BP for each industry 2. Combine the two metrics into a composite score and rank industries[7][47] **Factor Evaluation**: The factor has delivered strong excess returns in 2009, 2017, and 2021-2023[47] - **Factor Name**: Bankruptcy Value (PB+SIZE) **Factor Construction Idea**: Targets industries with low PB and small size, focusing on stagnation and recession phases[7] **Factor Construction Process**: 1. Calculate PB and SIZE for each industry 2. Combine the two metrics into a composite score and rank industries[7][50] **Factor Evaluation**: The factor has shown significant excess returns in 2015-2016 and 2021-2023[50] Model Backtesting Results - **Quantitative Market Trend Judgment Framework**: - Annualized return: 27.81% since 2009 - Significant excess returns in 2017, 2020, 2021, and 2022[17][20] Factor Backtesting Results - **Expected Growth ($gf$)**: - Recent performance: Top industries include automotive sales, lithium battery equipment, and tungsten, with mixed returns over the past three months (e.g., -4.47% for automotive sales, +0.25% for lithium battery equipment)[37] - **Actual Growth ($g$)**: - Recent performance: Top industries include photovoltaic equipment and insurance, with mixed returns over the past three months (e.g., -8.92% for photovoltaic equipment, -6.04% for insurance)[39] - **Profitability (ROE)**: - Recent performance: Top industries include agriculture and garden engineering, with mixed returns over the past three months (e.g., -4.19% for agriculture, -2.07% for garden engineering)[41] - **Quality Dividend (DP+ROE)**: - Recent performance: Top industries include forestry and lithium battery equipment, with mixed returns over the past three months (e.g., +1.21% for forestry, +0.25% for lithium battery equipment)[44] - **Value Dividend (DP+BP)**: - Recent performance: Top industries include security and buses, with mixed returns over the past three months (e.g., +6.09% for security, +12.65% for buses)[47] - **Bankruptcy Value (PB+SIZE)**: - Recent performance: Top industries include automotive sales and textile products, with mixed returns over the past three months (e.g., -4.47% for automotive sales, +4.09% for textile products)[50]

- The report introduces a quantitative model framework for market trend analysis, focusing on five asset style stages: external growth, quality growth, quality dividend, value dividend, and bankruptcy value. The model evaluates assets based on their intrinsic attributes and prioritizes them using the sequence of g > ROE > D, analyzing whether there are "good assets" and whether they are "expensive" [5][8][9] - The model incorporates key factors such as expected growth (gf), actual growth (g), profitability (ROE), high dividend (D), and bankruptcy value (B/P). Each factor is associated with specific market phases, e.g., expected growth is relevant across all phases, while profitability is emphasized during maturity phases [9][12] - The quantitative model has demonstrated strong historical performance, achieving an annualized return of 27.67% since 2009. It has shown consistent excess returns in most years, particularly post-2017, with limited effectiveness in years like 2011, 2012, and 2016 [19][22] - The model's backtesting results for specific years include notable excess returns, such as 51% in 2009, 36% in 2013, and 62% in 2022. However, it also recorded underperformance in years like 2011 (-11%) and 2014 (-4%) [22] - The report details six specific strategies derived from the model, each focusing on different factors: - **Expected Growth Strategy**: Selects industries with the highest analyst-forecasted growth rates. Recent recommendations include sectors like automotive sales, lithium equipment, and tungsten [38][39] - **Actual Growth Strategy**: Focuses on industries with the highest unexpected growth (△g). Current recommendations include photovoltaic equipment, insurance, and coal chemical sectors [40][41] - **Profitability Strategy**: Targets high-ROE industries with low valuations under the PB-ROE framework. Recommended sectors include copper, liquor, and non-dairy beverages [43][44] - **Quality Dividend Strategy**: Utilizes a DP+ROE scoring system to identify industries. Current recommendations include forestry, lithium equipment, and fiberglass [46][47] - **Value Dividend Strategy**: Employs a DP+BP scoring system. Recommended sectors include security, daily chemicals, and buses [49][50] - **Bankruptcy Value Strategy**: Focuses on industries with the lowest PB+SIZE scores. Current recommendations include automotive sales, ceramics, and cotton textiles [53][54]