Testing a Chinese Micro-Cap Strategy Without Beijing Stock Exchange Shares

Summary

This account describes extending a backtest of a Chinese small-cap strategy and finding that returns before 2024 were negative. It attributes the later high returns largely to growth in the Beijing Stock Exchange, whose smaller companies strongly affected a strategy that selected by market capitalization. The author therefore removed Beijing Stock Exchange shares from the strategy universe.

A backtest excluding those shares reportedly produced annual returns of about 30%. The author then optimized the combined weighting of market capitalization and turnover, finding that stronger emphasis on market capitalization improved results. These are reported findings from one strategy and sample; the account gives no detailed dates, risk measures, transaction cost assumptions, or out-of-sample validation, so the performance claim should not be treated as evidence of durable returns.

Key ideas

• The author extended the backtest and found negative returns before 2024.
• The strategy's later high returns were attributed largely to growth in Beijing Stock Exchange shares.
• Removing those shares was intended to reduce the strategy's exposure to that market style.
• The revised backtest reportedly returned about 30% annually.
• Parameter optimization favored a higher market-capitalization weight over turnover, but validation details are absent.

Tags

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