After falling for 3 consecutive years, at the beginning of this year, the CSI 300 and ChiNext indices both recorded a large monthly decline in January, while the quantification, which had a strong performance in previous years, directly ushered in the "stock market crash".
The reason for the quantitative stock market crash is that there has been a crash in the small and micro cap style, let's take a look at the 400 ** that represent the smallest market capitalizationWind Micro Cap IndexTrend:
*：wind
The index has been strong for the past three years, bucking the market in both 2022 and 2023**, and surging nearly 50% in 2023. However, this year, it has fallen by nearly 47% in a month's time, erasing the gains of the past two and a half years in a near-straight line.
The CSI 2000 Index, which represents a market capitalization ranking of 1,800-3,800, has a similar trend. The CSI 2000 Index fell -328%。The CSI 500 Index and the CSI 1000 Index, which represent small and mid-cap capitalizations, also retraced 27% and 17% respectively in this range.
The collapse of small and mid-cap indices, especially small and micro cap indices, has brought the highly sought-after quantitative investments** of the past few years into a stock market crash mode, and the types affected** include the CSI 500 Index Increase, the CSI 1000 Index Increase, the Air Index Increase (all-market quantitative stock selection strategy), market neutrality, and DMA (multi-leverage market neutral strategy).
There are CSI 1000 index increases and falls by more than 20% in a week, there are quantitative stock selection stocks that have fallen by more than 30% during the year, there are market-neutral "low-risk" strategies that have fallen by more than 5% in 3 days (equivalent to the increase in last year), and correspondingly, there are DMA strategies that have fallen by more than 20% in 3 days.
This is an accident of negative beta, negative excess returns, and a sharply fluctuating basis, let's do an in-depth review here.
Judging from the trend of the CSI 1000 and CSI 2000, these two small-cap style indices that have been with excess returns in the past few years have been weakening since November last year, while the other index has begun to strengthen in the same period, that isCSI Bank Index,The recent trend of the index is as follows:
*：wind
It can be seen that after the Shanghai Composite Index fell below 3,000 points, the bank index strengthened against the market, and the national team chose banks and Zhongzitou to protect the index, which caused the market to worry, will the style of the large and small caps be reversed? After all, the small-cap style has been dominant for nearly 3 years.
The market's move further validates the fear of style shifts, with the CSI 1000 and CSI 2000 continuing to underperform the CSI 300. At the basis level, the basis of the CSI 300 has been slightly positive, while the negative basis of the CSI 1000 stock index** is getting larger and larger.
Last year, the performance of the neutral strategy was very good, with the index rising by nearly 7%, and the returns of neutral products of the leading companies were generally in double digits. It makes DMA products with 4 times leverage make a lot of money。At the end of the year, as the negative basis of the stock index** further widened, the net value of neutral products continued to rise.
However, the basis will eventually converge, and it is difficult for neutral to continue to make gains when the basis continues to expand. Some of the prescient funds have started to take profits and neutral DMA products. ThisThere are two actions involved: selling the ** position of the long end and closing the short order of the stock index**.
In the past few years, whether it is the CSI 1000 index increase or the neutral strategy of the longs, if they want to make a good excess return, the position is likely to be exposed in the small and micro market. Neutral and DMAThe closing of the long side became a snowflake that triggered an avalanche of small microdisks
Another snowflake comes from a snowball productWith the acceleration of small-cap stocks**, many snowball products linked to the CSI 500 and CSI 1000 indexes issued in the previous two years have begun to hammer in. According to statistics, the stock of snowball products knocked in or close to knock-in in January was close to 200 billion.
Snowball product knock-in will not directly lead to the selling pressure of **, but it will do affect the basis of the stock index**, with the product knock-in, the brokerage has to sell the position in hand, so that the basis of the stock index ** further expanded
On the one hand, the basis of the stock index has become larger, so that people dare not continue to take profit on neutral products, and on the other hand, the demand for neutral or DMA products to take profit has increased. In addition, the exaggerated interpretation that a snowball knock-in will trigger a crash has also triggered panic selling in small and medium-sized caps. Through this link, the selling pressure of small and medium-sized caps gradually increases, so they affect each other, causing an avalanche.
Why is the avalanche so intense? The reason is that the market huddle has gone to the extremeIn recent years, the consistency and scale of quantification** in small and micro disks have been comparable to the "Mao Index" at the beginning of 2021Huddle to the extreme, and in the end it is a game of who can run faster。Quant** is basically through programmatic trading, and the overly consistent selling operation forms a sharp contradiction with the liquidity of small and micro cap stocks. By the end of January, micro-cap stocks represented by the Wind Micro-Cap Index had fallen into a liquidity crisis, and many tickets had a state of unlimited decline at the opening, and the index began to line up.
If the state of quantification in January can be described in terms of **, then the first two weeks of February can only be described as a stock market crash.
The week of January 29 to February 2 is different from the week of February 5 to February 8, and we will review it on a weekly basis.
January 29-February 2
This week's ** is easier to understand, and it can be summed up as beta**. The CSI 1000 fell 132%, CSI 2000 fell 168%, Wind Micro Disk fell 21 in a single week7%。The reason why the increase and fall of those quantitative stock selection products and the CSI 1000 Index is much greater than that of the index is very simple, that is, they are exposed too much in the style of small and micro caps.
The neutral strategy was actually not so bad this week, with a typical weekly product decline of between 1% and 2%. The reason is that although the excess of the bulls has retraced, the basis of the stock index ** has also widened rapidly due to the stock index**, which forms a certain hedge against the net value of the neutral strategy. So holders of neutral strategies are not feeling so bad this week.
Since the private placement is to update last week's net value around next Wednesday, many holders see that the annual return of their neutral strategy is still positive on the day before February 8 (because that is the net value as of February 2), and the real Wang Bang is the year after the year, that is, when the net value of the week of February 8 is disclosed.
February 5 - February 8
This week's ** can be described as ups and downs, and it needs to be interpreted day by day.
Feb. 5 was the worst day of decline, with the Wind Microcap Index falling 137%, CSI 2000 fell 949%, CSI 1000 fell 616%。This day is also simple and crude for long products such as index increase and quantitative stock selection, that is, the double kill of beta and excess returns, and it is not uncommon for products with a little bit of micro disk to fall by more than 10% in a single day. For neutral products, the excess drawdown of the long end of the day is larger, and the net value decline will be slightly larger than that of the previous days, but because the basis of the stock index ** is also continuing to expand, forming a certain hedge, the day's decline is not outrageous.
Before saying February 6th**, there is a news insertion, that is, the regulatory restricts DMA from selling and closing positions.
This led to a lore on neutral strategies and DMAs on February 6, which some quantitative managers called the existence of a disruptive industry.
Let's take a look at what happened on February 6, when the national team began to save the small and medium-cap indices represented by the CSI 500 and CSI 1000. DMA is restricted from closing positions, and the accurate interpretation is to limit net selling, that is, how much is sold, and how much must be sold. In order to reduce the loss of the excess on the long side that is persistently negative,The index, neutral and DMA products in the market have done the same thing, and that is the index constituents, so that on the one hand there will be no net selling, and on the other hand, there will be no negative overload.
As a result, both the CSI 500 and the CSI 1000 soared on the same day, and the CSI 500 rose by 775%, and the CSI 1000 Index rose 697%。However, the CSI 2000 is still in a state of significant underperformance, with a daily increase of only 202%, Wind Micro Disk continued to **4% on the same day. Such a differentiated ** makes the products that are still exposed in the style of small and micro disks have a huge negative excess on the same day. At the same time, due to the sharp rise in the index, the basis of the stock index ** narrowed rapidly, which formed a double kill for market-neutral productsBecause the negative contribution of both sides is too great, it has become a lore。As far as we know, some market-neutral products fell by more than 4% on the same day, and DMA products fell by more than 20% in a single day.
February 7 continued the previous day's trend, and the index constituents continued to rally sharply, and for long products, even if the excess was negative, at least at the beta level. Neutral and DMA products are still in the drawdown period.
On February 8, with the release of various good news in the market, it finally ushered in a comprehensive **, the small and micro market began to be violent**, and the CSI 2000 ETF rose on the same day. DMA's liquidation restrictions have also been lifted, and the excess of small and micro market style ** has returned, but how many ** can hold on to this day without stop loss or position adjustment?
To sum up,2.5-2.8 This week, the index increase product ushered in a large repair at the beta level, but the neutral and DMA fell to the previous year's or even two-year gains in a few days。Since this week's net worth disclosure is after the new year, it is unclear whether the latest net worth will lead to a new round of redemptions.
On the first day after the holiday, ** continued to rise, and the CSI 2000 rose by more than 4% on the first day, which made us look forward to the new year**. However, the "quantitative stock market crash" that passed just a few years ago can't help but make people feel uneasy, how to view the stock market crash and future quantitative investment opportunities?
Preferred,The rapid development of quantitative investing since 2021 and the predominance of small and mid-cap markets in the market style have been so much so that by the end, the boundaries between alpha and beta have blurred。The small and micro disk style has always been dominant, so if you want to make a bright return, you must more or less expose the style, and the momentum factor will unconsciously become a deviation from the style. This event is a vivid risk education lesson for both investors and managers. Risk control should always be put in the first place, and the money earned from style deviation will be returned after all, and it will be in a very fast way.
In an avalanche, no snowflake is innocent. When huddles, no party's funds are innocent. Everyone likes a high yield, low drawdown, 45-degree upward equity curve. If the neutral strategy performs well, then increase leverage, and eventually usher in a backlash at the entire industry level.
Secondly, don't go where there are many people is the truth in investment. In the second half of last year, there was an overwhelming number of articles in the market advocating micro-cap stocks, and DMA's earnings also dominated the list for a long time, which are all red flags. The product with the largest drawdown may be the product with the highest return in the past year, and once again remind us not to be afraid that a product will not be beaten because of the high return of a product in the past.
Mr. Cheng once wrote an article on January 23 "Market neutrality has reached an important time window" to remind the risk of market neutrality, especially DMA, on the grounds that the market environment at that time was not conducive to the long end of the excess, and the short end of the stock index ** basis has been large. Although I didn't expect the crash to come so quickly, butMaking appropriate and advanced rational judgments based on the market environment is the value of FOF investment and research.
At this point in time, the market continues to dig a big hole after three consecutive declines, and the valuations of most broad-based indices have reached very low levels, so we don't need to focus on all the risks that have occurred. This quantitative stock market crash is a rapid concentrated release of small and micro cap style risks accumulated over the years, and is not the norm in the market.
After a round of clearing, the market has become less crowded. Taking the gains of the past two years as an example, the gap between the CSI 300 and the CSI 2000 has converged. There are fewer players, the index has fallen, and the excess space has gone up.
Extreme** also provides us with more basis for choosing managers, we found several "honest" managers who are good in excess, but strictly control the exposure of market capitalization style, such as the CSI 500 index increase of JL and CQ, and the CSI 1000 index increase retracement control of TT and YF is relatively good.