Quantitative Models and Construction Methods Model Name: Timing Radar Six-Factor Model - **Model Construction Idea**: The model aims to capture the performance of the equity market through multiple dimensions, including liquidity, economic conditions, valuation, capital flows, technical indicators, and crowding. It summarizes these into four categories: "Valuation Cost-Effectiveness," "Macroeconomic Fundamentals," "Capital & Trend," and "Crowding & Reversal," generating a comprehensive timing score between [-1,1][1][6]. - **Model Construction Process**: - **Liquidity**: Includes indicators like monetary strength and credit strength. For example, the monetary direction factor is calculated based on the average change in central bank policy rates and short-term market rates over the past 90 days[12][15][18][21]. - **Economic Conditions**: Includes indicators like inflation direction and growth direction. For instance, the growth direction factor is based on PMI data, calculated as the 12-month moving average and year-over-year change[22][26][27][31]. - **Valuation**: Includes indicators like Shiller ERP, PB, and AIAE. For example, Shiller ERP is calculated as 1/Shiller PE minus the 10-year government bond yield, with a z-score over the past three years[32][36][39]. - **Capital Flows**: Includes indicators like margin trading increment and trading volume trend. For example, the margin trading increment is calculated as the difference between the 120-day and 240-day moving averages of financing balance minus short selling balance[41][44][47][49]. - **Technical Indicators**: Includes indicators like price trend and new highs and lows. For example, the price trend is measured using the distance between the 120-day and 240-day moving averages[51][54]. - **Crowding**: Includes indicators like implied premium/discount from derivatives and convertible bond pricing deviation. For example, the implied premium/discount is derived from the put-call parity relationship in options[57][62][65]. - **Model Evaluation**: The model provides a comprehensive view of market conditions by integrating multiple dimensions, making it a robust tool for market timing[1][6]. Model Backtesting Results - **Current Comprehensive Score**: -0.10, indicating a neutral view overall[1][6]. - **Liquidity Score**: 0.00, indicating a neutral signal[8]. - **Economic Conditions Score**: 0.00, indicating a neutral signal[8]. - **Valuation Score**: -0.11, indicating a slightly bearish signal[8]. - **Capital Flows Score**: 0.00, indicating a neutral signal[8]. - **Technical Indicators Score**: -0.50, indicating a bearish signal[8]. - **Crowding Score**: -0.13, indicating a slightly bearish signal[8]. Quantitative Factors and Construction Methods Factor Name: Monetary Direction Factor - **Factor Construction Idea**: To determine the direction of current monetary policy by comparing central bank policy rates and short-term market rates over the past 90 days[12]. - **Factor Construction Process**: - Calculate the average change in central bank policy rates and short-term market rates over the past 90 days. - If the factor is greater than 0, it indicates a loose monetary policy; if less than 0, it indicates a tight monetary policy[12]. - **Factor Evaluation**: Provides a clear indication of the monetary policy direction, which is crucial for market timing[12]. Factor Name: Credit Direction Factor - **Factor Construction Idea**: To measure the tightness of credit transmission from commercial banks to the real economy using long-term loan indicators[18]. - **Factor Construction Process**: - Calculate the monthly value of long-term loans. - Compute the year-over-year change over the past 12 months. - If the factor is rising compared to three months ago, it indicates a bullish signal; otherwise, it indicates a bearish signal[18]. - **Factor Evaluation**: Effectively captures the credit conditions in the economy, which is vital for assessing market liquidity[18]. Factor Backtesting Results - **Monetary Direction Factor**: Score of 1, indicating a bullish signal[12]. - **Credit Direction Factor**: Score of 1, indicating a bullish signal[18]. - **Monetary Strength Factor**: Score of -1, indicating a bearish signal[15]. - **Credit Strength Factor**: Score of -1, indicating a bearish signal[21]. - **Growth Direction Factor**: Score of -1, indicating a bearish signal[22]. - **Growth Strength Factor**: Score of -1, indicating a bearish signal[26]. - **Inflation Direction Factor**: Score of 1, indicating a bullish signal[27]. - **Inflation Strength Factor**: Score of 1, indicating a bullish signal[31]. - **Shiller ERP**: Score of 0.16, indicating a slightly bearish signal[32]. - **PB**: Score of -0.38, indicating a bearish signal[36]. - **AIAE**: Score of -0.11, indicating a slightly bearish signal[39]. - **Margin Trading Increment**: Score of -1, indicating a bearish signal[41]. - **Trading Volume Trend**: Score of -1, indicating a bearish signal[44]. - **China Sovereign CDS Spread**: Score of 1, indicating a bullish signal[47]. - **Overseas Risk Aversion Index**: Score of 1, indicating a bullish signal[49]. - **Price Trend**: Score of 0, indicating a neutral signal[51]. - **New Highs and Lows**: Score of -1, indicating a bearish signal[54]. - **Implied Premium/Discount**: Score of 1, indicating a bullish signal[57]. - **Implied Volatility (VIX)**: Score of 0, indicating a neutral signal[58]. - **Implied Skewness (SKEW)**: Score of -1, indicating a bearish signal[62]. - **Convertible Bond Pricing Deviation**: Score of -0.51, indicating a bearish signal[65].

Quantitative Models and Construction Methods - **Model Name**: Timing Radar Six-Factor Framework **Model Construction Idea**: The model evaluates equity market performance by integrating 21 indicators across six dimensions: liquidity, economic fundamentals, valuation, capital flows, technical trends, and crowding. These are further categorized into four major groups: "Valuation Cost-Effectiveness," "Macro Fundamentals," "Capital & Trend," and "Crowding & Reversal," generating a composite timing score within the range of [-1,1][1][5][7] **Model Construction Process**: 1. Select 21 indicators across six dimensions to represent market characteristics 2. Group indicators into four categories: - Valuation Cost-Effectiveness - Macro Fundamentals - Capital & Trend - Crowding & Reversal 3. Normalize the scores of each indicator to a range of [-1,1] 4. Aggregate the scores to compute a composite timing score within [-1,1][1][5][7] **Model Evaluation**: The model provides a comprehensive multi-dimensional perspective for market timing, offering insights into market trends and sentiment[1][5][7] Model Backtesting Results - **Timing Radar Six-Factor Framework**: - Composite Timing Score: -0.21 (Neutral to slightly bearish)[1][5][7] - Liquidity Score: -1.00 (Significant bearish signal)[1][7][9] - Economic Fundamentals Score: 0.00 (No significant signal)[1][7][9] - Valuation Score: -0.17 (Neutral signal)[1][7][9] - Capital & Trend Score: 0.50 (Significant bullish signal)[1][7][9] - Technical Trends Score: 0.00 (No significant signal)[1][7][9] - Crowding & Reversal Score: -0.69 (Significant bearish signal)[1][7][9] Quantitative Factors and Construction Methods Liquidity Factors - **Factor Name**: Monetary Direction Factor **Construction Idea**: Measures the direction of monetary policy using central bank policy rates and short-term market rates **Construction Process**: - Calculate the average change in policy and market rates over the past 90 days - If the factor > 0, monetary policy is deemed expansionary; if < 0, it is contractionary **Current View**: The factor is < 0, signaling a bearish outlook with a score of -1[11][13] - **Factor Name**: Monetary Intensity Factor **Construction Idea**: Based on the "interest rate corridor" concept, measures the deviation of short-term market rates from policy rates **Construction Process**: - Compute deviation = DR007/7-year reverse repo rate - 1 - Smooth and normalize using z-score - If the factor < -1.5 standard deviations, it indicates a bullish environment; if > 1.5, it is bearish **Current View**: The factor signals a bearish outlook with a score of -1[14][15][16] - **Factor Name**: Credit Direction Factor **Construction Idea**: Reflects the transmission of credit from banks to the real economy using long-term loan data **Construction Process**: - Calculate the 12-month incremental change in long-term loans - Compare the year-over-year change to three months prior - If the factor is rising, it is bullish; if falling, it is bearish **Current View**: The factor signals a bearish outlook with a score of -1[17][19] - **Factor Name**: Credit Intensity Factor **Construction Idea**: Captures whether credit metrics significantly exceed or fall short of expectations **Construction Process**: - Compute = (New RMB loans - median forecast) / forecast standard deviation - Normalize using z-score - If the factor > 1.5 standard deviations, it is bullish; if < -1.5, it is bearish **Current View**: The factor signals a bearish outlook with a score of -1[20][22] Economic Factors - **Factor Name**: Growth Direction Factor **Construction Idea**: Based on PMI data, measures the trend of economic growth **Construction Process**: - Calculate the 12-month moving average of PMI data - Compare the year-over-year change to three months prior - If the factor is rising, it is bullish; if falling, it is bearish **Current View**: The factor signals a bullish outlook with a score of 1[23][24] - **Factor Name**: Growth Intensity Factor **Construction Idea**: Captures whether economic growth metrics significantly exceed or fall short of expectations **Construction Process**: - Compute PMI surprise = (PMI - median forecast) / forecast standard deviation - Normalize using z-score - If the factor > 1.5 standard deviations, it is bullish; if < -1.5, it is bearish **Current View**: The factor signals a bearish outlook with a score of -1[25][27] - **Factor Name**: Inflation Direction Factor **Construction Idea**: Measures the trend of inflation using CPI and PPI data **Construction Process**: - Compute = 0.5 × smoothed CPI year-over-year + 0.5 × raw PPI year-over-year - Compare the change to three months prior - If the factor is falling, it is bullish; if rising, it is bearish **Current View**: The factor signals a bearish outlook with a score of -1[28][30] - **Factor Name**: Inflation Intensity Factor **Construction Idea**: Captures whether inflation metrics significantly exceed or fall short of expectations **Construction Process**: - Compute CPI and PPI surprises = (Reported value - median forecast) / forecast standard deviation - Average the two surprises to form the factor - If the factor < -1.5, it is bullish; if > 1.5, it is bearish **Current View**: The factor signals a bullish outlook with a score of 1[31][33] Valuation Factors - **Factor Name**: Shiller ERP **Construction Idea**: Adjusts for economic cycles to evaluate market valuation **Construction Process**: - Compute Shiller PE = average inflation-adjusted earnings over the past six years - Compute ERP = 1/Shiller PE - 10-year government bond yield - Normalize using z-score over the past three years **Current View**: The factor score decreased to 0.39[34][38] - **Factor Name**: PB **Construction Idea**: Similar to ERP, evaluates market valuation using price-to-book ratio **Construction Process**: - Compute PB × (-1) - Normalize using z-score over the past three years - Truncate to ±1 range **Current View**: The factor score decreased to -0.49[36][39] - **Factor Name**: AIAE **Construction Idea**: Reflects market-wide equity allocation and risk appetite **Construction Process**: - Compute AIAE = total market cap of CSI All Share Index / (total market cap + total debt) - Multiply by (-1) and normalize using z-score over the past three years **Current View**: The factor score decreased to -0.41[40][42] Capital Flow Factors - **Factor Name**: Margin Trading Increment **Construction Idea**: Measures market leverage and sentiment using margin trading data **Construction Process**: - Compute = financing balance - short selling balance - Compare the 120-day moving average increment to the 240-day moving average increment - If the short-term increment > long-term increment, it is bullish; otherwise, bearish **Current View**: The factor signals a bullish outlook with a score of 1[44][46] - **Factor Name**: Turnover Trend **Construction Idea**: Measures market activity and capital flow using turnover data **Construction Process**: - Compute log turnover moving average distance = ma120/ma240 - 1 - If the maximum of the 10, 30, and 60-day distances is positive, it is bullish; otherwise, bearish **Current View**: The factor signals a bullish outlook with a score of 1[47][49] - **Factor Name**: China Sovereign CDS Spread **Construction Idea**: Reflects foreign investors' sentiment towards China's credit risk **Construction Process**: - Compute the 20-day difference of smoothed CDS spreads - If the difference < 0, it is bullish; otherwise, bearish **Current View**: The factor signals a bullish outlook with a score of 1[50][51] - **Factor Name**: Overseas Risk Aversion Index **Construction Idea**: Captures global risk sentiment using Citi RAI Index **Construction Process**: - Compute the 20-day difference of smoothed RAI - If the difference < 0, it is bullish; otherwise, bearish **Current View**: The factor signals a bearish outlook with a score