Fundamental Factor Research: Monthly Revenue Information - part2

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3.3 Quantitative Strategy and Backtesting Results

Based on preceding results, SURPS3MTA demonstrates clear return monotonicity and significant long-short portfolio Alpha. REVOPY possesses strong ranking predictive power distributed across the full cross-section. This study evaluates 7 backtesting strategies utilizing these two factors plus MOM52WH to test real-world execution feasibility and multi-factor fusion value.

Strategy Definitions

All seven strategies share identical construction rules, differing solely in ranking score sources. Each factor ranks stocks cross-sectionally; higher factor values yield higher ranking scores. Single-factor strategies directly adopt factor ranking scores; multi-factor strategies sum component factor ranking scores into a composite score. The top 50 stocks with highest composite scores within the pool are selected and equal-weighted.

Table 3-11: Definitions of Seven Strategies

Strategy	Portfolio Level	Ranking Score
(1) SURPS3MTA	Single-Factor	SURPS3MTA Ranking Score
(2) REVOPY	Single-Factor	REVOPY Ranking Score
(3) MOM52WH	Single-Factor	MOM52WH Ranking Score
(4) SURPS+OPY	Dual-Factor	SURPS3MTA + REVOPY Ranking Score Sum
(5) SURPS+MOM	Dual-Factor	SURPS3MTA + MOM52WH Ranking Score Sum
(6) OPY+MOM	Dual-Factor	REVOPY + MOM52WH Ranking Score Sum
(7) SURPS+OPY+MOM	Triple-Factor	SURPS3MTA + REVOPY + MOM52WH Ranking Score Sum

Performance Analysis

Backtesting results across the 7 strategies indicate:

• Single-Factor Strategies: SURPS3MTA (Sharpe 1.232) and MOM52WH (Sharpe 1.386) outperform the benchmark index (Sharpe 1.093); REVOPY single-factor performs worst (Sharpe 0.509), confirming its strength does not lie in top extreme deciles.
• Significant Multi-Factor Fusion Incremental Value: The triple-factor strategy (SURPS+OPY+MOM) achieves the best risk-adjusted performance, with its Sharpe ratio elevating to 1.779—the highest among all seven strategies—accompanied by an annualized return of 26.06% and a max drawdown compressing to −23.42%.
• Complementary Value of Weaker Factors: Although REVOPY is weakest standalone, adding it to “SURPS+MOM” boosts Sharpe ratio from 1.647 to 1.779, providing significant incremental contribution. The triple-factor strategy’s Newey-West Alpha t-value reaches 5.454; furthermore, as returns in Table 3-12 already deduct annualized transaction costs (2.74%, comprising brokerage commissions and taxes only), the strategy remains highly statistically and economically significant.

Table 3-12: Backtesting Performance Metrics of Seven Strategies

Metric	(1) SURPS	(2) REVOPY	(3) MOM52WH	(4) SURPS+OPY	(5) SURPS+MOM	(6) OPY+MOM	(7) Triple	Benchmark
Annualized Return	23.51%	6.85%	19.14%	21.29%	28.52%	18.40%	26.06%	19.32%
Cumulative Return	942.88%	108.73%	598.98%	752.81%	1521.00%	552.51%	1208.46%	611.06%
Annualized Volatility	18.56%	15.37%	13.28%	15.30%	16.03%	11.82%	13.54%	17.60%
Sharpe Ratio	1.232	0.509	1.386	1.339	1.647	1.489	1.779	1.093
Max Drawdown	−33.73%	−31.55%	−21.76%	−28.98%	−22.83%	−24.14%	−23.42%	−28.76%
Sortino Ratio	1.665	0.663	1.915	1.797	2.285	1.993	2.428	1.542
Alpha	0.072	−0.052	0.083	0.074	0.143	0.080	0.134	—
Beta	0.827	0.684	0.545	0.695	0.676	0.517	0.598	—
Annual Turnover (One-Way)	6.15	1.96	7.07	4.55	6.22	3.60	4.68	—
Annual Trading Cost	3.60%	1.17%	4.13%	2.67%	3.64%	2.11%	2.74%	—
Monthly NW Alpha t	2.124	−1.095	3.649	2.507	4.102	3.063	5.454	—

Note: Alpha / Beta represent intercept and slope from CAPM regression of strategy daily returns against benchmark index daily returns, with Alpha annualized; Monthly NW Alpha t indicates Newey-West t-statistic of Alpha from regressing strategy monthly returns against benchmark index.

Figure 3-13: Cumulative Returns of Single-Factor Strategies vs. Benchmark Index

(The vertical axis represents cumulative return multiples; complete performance metrics for all seven strategies are detailed in Table 3-12.)

Figure 3-14: Cumulative Returns of Multi-Factor Strategies vs. Benchmark Index

3.4 Conclusion

Sampling Taiwan listed companies from January 2015 to June 2026, this paper evaluates monthly revenue factors SURPS3MTA and REVOPY alongside price momentum MOM52WH across 7 backtested strategies net of transaction costs, yielding two core conclusions:

• 1. Factor Predictive Distributions Exhibit Heterogeneity: SURPS3MTA predictive power concentrates in extreme deciles with significant long-short Alpha; REVOPY demonstrates robust cross-sectional predictive power (IC), where evaluating solely extreme deciles underestimates its true value.
• 2. Multi-Factor Fusion Creates Exceptional Synergy: Standalone performance does not equal portfolio contribution. Combining revenue surprise, valuation, and price anchoring creates mechanism complementarities that significantly elevate strategy Sharpe ratio and compress drawdowns.

These empirical results validate the value of monthly revenue disclosures: Taiwan’s unique regulatory framework updates fundamental signals monthly, allowing factors built upon it to deliver significant excess alpha even after accounting for real-world transaction costs.

*Disclaimer: This research and the highlighted securities are for informational purposes only and do not constitute investment advice or product recommendations.*