Quantitative Factors and Construction Methods - **Factor Name**: Single-quarter ROE **Construction Idea**: This factor measures the return on equity (ROE) for a single quarter, reflecting the profitability of a company relative to its equity base[2][18] **Construction Process**: The formula for single-quarter ROE is: $ Quart\_ROE = \frac{Net\ Income \times 2}{Beginning\ Equity + Ending\ Equity} $ Here, "Net Income" represents the net profit for the quarter, and "Beginning Equity" and "Ending Equity" are the equity values at the start and end of the quarter, respectively[18] **Evaluation**: This factor performed well in the CSI All Share Index space during the past week, indicating its effectiveness in identifying profitable stocks[2][42] - **Factor Name**: Single-quarter ROA **Construction Idea**: This factor evaluates the return on assets (ROA) for a single quarter, assessing how efficiently a company utilizes its assets to generate profits[18] **Construction Process**: The formula for single-quarter ROA is: $ Quart\_ROA = \frac{Net\ Income \times 2}{Beginning\ Assets + Ending\ Assets} $ "Net Income" is the quarterly net profit, while "Beginning Assets" and "Ending Assets" are the total assets at the start and end of the quarter, respectively[18] **Evaluation**: This factor also demonstrated strong performance in the CSI All Share Index space over the past week, highlighting its utility in asset efficiency analysis[2][42] - **Factor Name**: Standardized Unexpected Earnings (SUE) **Construction Idea**: This factor captures the deviation of actual earnings from expected earnings, standardized by the standard deviation of expected earnings, to measure earnings surprises[18] **Construction Process**: The formula for SUE is: $ SUE = \frac{Actual\ Earnings - Expected\ Earnings}{Standard\ Deviation\ of\ Expected\ Earnings} $ "Actual Earnings" refers to the reported earnings, while "Expected Earnings" and their standard deviation are derived from analyst forecasts[18] **Evaluation**: This factor showed significant positive performance in the National SME Index (CSI 2000) and the ChiNext Index spaces, indicating its effectiveness in identifying earnings surprises[36][39] Factor Backtesting Results - **Single-quarter ROE**: - CSI All Share Index: Weekly return of 1.46%, monthly return of 1.95%, annualized return over the past year of -1.73%, and historical annualized return of 4.88%[42][43] - **Single-quarter ROA**: - CSI All Share Index: Weekly return of 1.09%, monthly return of 1.33%, annualized return over the past year of 0.27%, and historical annualized return of 4.14%[42][43] - **Standardized Unexpected Earnings (SUE)**: - National SME Index (CSI 2000): Weekly return of 6.41%, monthly return of 19.22%, annualized return over the past year of 32.33%, and historical annualized return of 10.98%[36] - ChiNext Index: Weekly return of 7.76%, monthly return of 26.34%, annualized return over the past year of 44.74%, and historical annualized return of 7.82%[39] Composite Factor Portfolio Construction - **MFE Portfolio Construction**: **Idea**: The Maximized Factor Exposure (MFE) portfolio is designed to maximize the exposure to a single factor while controlling for constraints such as industry and style exposures, stock weight deviations, and turnover[55][59] **Optimization Model**: The optimization problem is formulated as: $ \begin{array}{ll} max & f^{T}w \\ s.t. & s_{l} \leq X(w-w_{b}) \leq s_{h} \\ & h_{l} \leq H(w-w_{b}) \leq h_{h} \\ & w_{l} \leq w-w_{b} \leq w_{h} \\ & b_{l} \leq B_{b}w \leq b_{h} \\ & 0 \leq w \leq l \\ & 1^{T}w = 1 \\ & \Sigma|w-w_{0}| \leq to_{h} \end{array} $ Here, $f$ represents the factor values, $w$ is the weight vector, and the constraints include style, industry, stock weight, and turnover limits[55][58] **Evaluation**: The MFE portfolio approach ensures that factor effectiveness is tested under realistic constraints, making it a robust method for evaluating factor performance[55][59] MFE Portfolio Backtesting Results - **CSI 300 Index**: - Weekly excess return: Maximum 1.05%, minimum -0.81%, median 0.00%[46][49] - Monthly excess return: Maximum 3.00%, minimum -1.15%, median 0.30%[46][49] - **CSI 500 Index**: - Weekly excess return: Maximum 1.00%, minimum -0.08%, median 0.40%[50][52] - Monthly excess return: Maximum 2.73%, minimum -0.42%, median 0.99%[50][52] - **CSI 1000 Index**: - Weekly excess return: Maximum 0.82%, minimum -0.26%, median 0.28%[53][54] - Monthly excess return: Maximum 3.52%, minimum -0.08%, median 1.72%[53][54]

Quantitative Factors and Construction Methods Factor Name: Liquidity - **Construction Idea**: Measures the market's preference for high-liquidity assets, reflecting the demand for stocks with higher turnover rates [9][14] - **Construction Process**: - **TO**: Average logarithmic turnover rate over the past 243 trading days - **Liquidity Beta**: Regression of individual stock turnover rates against market turnover rates over the past 243 trading days [14] - **Evaluation**: Demonstrated the highest positive return among style factors in the recent week, indicating a significant increase in demand for high-liquidity assets [9] - **Performance**: Weekly return of 5.44%, monthly return of 13.08%, and annualized return of 33.79% over the past year [11] Factor Name: Volatility - **Construction Idea**: Captures the market's preference for high-volatility stocks, reflecting risk appetite [9][14] - **Construction Process**: - **Stdvol**: Standard deviation of daily returns over the past 243 trading days - **Ivff**: Fama-French 3-factor idiosyncratic volatility over the past 243 trading days - **Range**: Difference between the highest and lowest prices over the past 243 trading days - **MaxRet_6**: Average return of the six highest daily returns over the past 243 trading days - **MinRet_6**: Average return of the six lowest daily returns over the past 243 trading days [14] - **Evaluation**: Showed a significant improvement in weekly performance, reflecting increased market risk appetite [9] - **Performance**: Weekly return of 5.03%, monthly return of 12.37%, and annualized return of 25.55% over the past year [11] Factor Name: Beta - **Construction Idea**: Represents the market's preference for high-beta stocks, indicating sensitivity to market movements [9][14] - **Construction Process**: Bayesian shrinkage of market beta [14] - **Evaluation**: Significant weekly performance improvement, indicating a strong preference for high-beta stocks [9] - **Performance**: Weekly return of 4.28%, monthly return of 12.51%, and annualized return of 33.02% over the past year [11] Factor Name: Growth - **Construction Idea**: Measures the market's preference for growth-oriented stocks, focusing on financial growth metrics [9][14] - **Construction Process**: - **Delta ROE**: Average change in ROE over the past three years - **Sales Growth**: 3-year compound growth rate of TTM sales revenue - **Na Growth**: 3-year compound growth rate of TTM net assets [14] - **Evaluation**: Improved weekly performance, reflecting increased market interest in growth stocks [9] - **Performance**: Weekly return of 1.65%, monthly return of 0.77%, and annualized return of 1.32% over the past year [11] Factor Name: Certainty - **Construction Idea**: Reflects the market's preference for stocks with higher predictability and stability [10][14] - **Construction Process**: - **Instholder Pct**: Proportion of holdings by mutual funds - **Cov**: Analyst coverage adjusted for market capitalization - **Listdays**: Number of days since the stock's listing [14] - **Evaluation**: Experienced a significant decline in weekly performance, indicating reduced confidence in certainty-based strategies [10] - **Performance**: Weekly return of -3.99%, monthly return of -9.10%, and annualized return of -17.07% over the past year [11] Factor Name: Value - **Construction Idea**: Measures the market's preference for undervalued stocks based on valuation metrics [10][14] - **Construction Process**: - **BP**: Book-to-price ratio - **EP**: Earnings yield [14] - **Evaluation**: Significant decline in weekly performance, reflecting reduced market interest in value-based strategies [10] - **Performance**: Weekly return of -4.75%, monthly return of -8.10%, and annualized return of -16.96% over the past year [11] Factor Name: Size - **Construction Idea**: Captures the market's preference for small-cap stocks [10][14] - **Construction Process**: Logarithm of total market capitalization [14] - **Evaluation**: Experienced the largest decline among style factors, indicating reduced market interest in small-cap stocks [10] - **Performance**: Weekly return of -5.96%, monthly return of -12.84%, and annualized return of -54.81% over the past year [11] --- Factor Backtesting Results Weekly Performance - **Liquidity**: 5.44% - **Volatility**: 5.03% - **Beta**: 4.28% - **Growth**: 1.65% - **Certainty**: -3.99% - **Value**: -4.75% - **Size**: -5.96% [11] Monthly Performance - **Liquidity**: 13.08% - **Volatility**: 12.37% - **Beta**: 12.51% - **Growth**: 0.77% - **Certainty**: -9.10% - **Value**: -8.10% - **Size**: -12.84% [11] Annualized Performance (Past Year) - **Liquidity**: 33.79% - **Volatility**: 25.55% - **Beta**: 33.02% - **Growth**: 1.32% - **Certainty**: -17.07% - **Value**: -16.96% - **Size**: -54.81% [11]