Convertible-Bond Issuers Ranked by Turnover, Size, and Profit Growth

Summary

This China A-share strategy uses the stocks underlying all listed convertible bonds as its universe, on the premise that eligibility to issue a convertible bond helps screen for established companies. It ranks candidates equally on three cross-sectional measures: 20-day average turnover, total market capitalization, and year-over-year net profit growth. The first two are oriented so lower values rank better; the growth score is reversed so stronger growth ranks better. The portfolio holds ten stocks equally and rebalances every five trading days, excluding ST stocks, suspended stocks, and companies with fewer than 252 trading days of listing history.

The document reports a backtest from 2016 to 2026 with 22.34% annualized return and a 34% maximum drawdown, using the CSI 300 as its benchmark. These figures are reported without details on transaction costs, data handling, or out-of-sample validation, so they do not establish future profitability. The author also suggests that changing factor weights would create alternative versions of the strategy.

Key ideas

• The stock universe consists of equities underlying convertible bonds.
• The ranking equally weights turnover, market capitalization, and net profit growth after aligning score directions.
• The portfolio holds ten equally weighted stocks and rebalances every five trading days.
• The reported backtest shows positive long-term returns but also a substantial maximum drawdown.
• The document does not provide enough detail to assess transaction costs or out-of-sample performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.