Conditional Judgment and Quantitative Analysis of A-Shares Adopting the U.S. Stock-Style 'Slow Rise, Sharp Drop, and Slow Bull' Pattern

Based on the obtained market indices (^GSPC, ^IXIC, 2020-2025) and online search results, I will conduct quantitative and logical deductions around the question: ‘Can increased institutional capital proportion + improved derivatives promote A-shares to adopt the U.S. stock-style “slow rise, sharp drop, and slow bull” pattern?’ Key areas covered include: structural changes, volatility comparison, derivative effects, neutral strategies and hedging costs, regulatory and institutional constraints, along with conditional judgments and verifiable methods.

I. Market Structure: Institutionalization Progress and Capital Proportion (2014-2025)

• Shareholding Value Caliber (Free Float Market Value):
  • 2014-2024: Retail investors’ shareholding value proportion dropped from 72.3% to 38.4%, while institutional shareholding proportion rose from 13.8% to 61.6% [1].
  • 2025Q1: Retail investors held 31.24% of free float market value; excluding locked shares of major shareholders, domestic and foreign institutional shareholding proportion was 43.98%, and retail investors accounted for approximately 28%-30% [4].
  • Implication: Pricing power is gradually tilting toward institutions, which has a potential positive effect on reducing turnover rate and short-term irrational volatility [1][4].
• Investor Account Caliber: Natural person investors still account for over 99.7% (exceeding 240 million accounts by the end of 2025Q2) [2], but there is a significant difference between account count and capital weight. Retail investors contribute 60%-70% of trading volume, while the market value held indirectly through public funds, ETFs, etc., is also significant (indirect influence can reach 38%-40%) [4].
• Benchmark Against U.S. Stocks (End of 2025Q2): Total market value is approximately 99.8 trillion USD, institutional shareholding proportion is 43.35%, retail is 38.51%, foreign capital is 18.14% [1]. Although institutions are not absolute leaders, long-term capital (pension funds, 401(k), etc.) accounts for a high proportion, combined with low turnover, forming the underlying structure of “slow bull and fast bear” [7][8].

II. Volatility Characteristics: A-Shares vs. U.S. Stocks (2020-2025)

• U.S. Stocks (Tool Data):
  • S&P 500 (^GSPC): Volatility 1.32%, 200-day MA 6267.39, closing price 6929.95 [0].
  • Nasdaq (^IXIC): Volatility 1.59%, 200-day MA 20742.77, closing price 23593.10 [0].
  • Long-Term Characteristics: Upward trend, relatively mild volatility, typical “slow bull and fast bear” (slow rise followed by sharp drop then recovery) [7][8].
• A-Shares (Online Clues, Step-by-Step Accuracy Limited):
  • Historical Profile: Significant booms and busts occurred in 2015 and 2021; from 2014 to 2024, institutional shareholding proportion showed a negative correlation with annualized volatility (Huaxi Securities estimates: each 10-percentage-point increase in institutional proportion may reduce annualized volatility by 3-5 percentage points) [1].
  • Implied Volatility: CSI 300 IV (CFE_000300IV) normal range is 15-25, average 21, can reach over 40 in extreme cases (e.g., 2024-10-08) [7]. The correlation between implied volatility and index movements is more complex: besides the VIX-style “volatility rises when market falls”, A-shares also have patterns like “IV rises/falls with the index” (related to investor structure and tool usage) [7].
• Quantitative Gap: Current tools do not provide daily volatility and segmented (upward/downward) volatility series for the entire A-share market; precise statistics on “slow rise/sharp drop” require subsequent data supplementation (see “Verification Path”).

III. Impact of Derivatives on Volatility: Hedging, Basis, and Structure

• Futures and Options Scale: China Financial Futures Exchange (CFFEX) has listed 11 equity and interest rate products; in 2025Q1, average daily trading volume was 1.272 million contracts, 1.1 trillion yuan, up 19.8%/41.6% year-on-year; average daily open interest was 2.014 million contracts, up 7.8% year-on-year [5].
• Basis and Contango:
  • Closing on 2025-06-04: Annualized basis of main contracts for IF/IH/IC/IM was approximately -14.72%/-13.83%/-18.95%/-24.53%, reaching the second-highest level in recent 5 years [6].
  • Causes of Contango: Strong short hedging demand from neutral strategies (scale of approximately 2500 billion yuan) far exceeds the allocation of index enhancement and passive public funds (about 14 billion yuan), leading to high hedging costs for CSI 500/1000, with the short side concentrated in IM contracts [6].
• Transmission to Volatility and Pricing:
  • Stabilizer (Conditional): When there is sufficient cross-period, cross-product hedging and ample liquidity, futures/options help smooth extreme volatility (e.g., using stock index futures to manage positions during ETF position building/large-scale subscriptions/redemptions) [5][6].
  • Volatility Amplifier (Local): During extreme market conditions and liquidity shrinkage, rapid expansion of basis, Gamma negative feedback, and cascading liquidations may exacerbate short-term volatility (e.g., 2025-04-07 event) [7].

IV. Double-Edged Effect of Neutral Strategies and Hedging Costs

• Neutral Strategy Scale: Approximately 2500 billion yuan of short hedging demand [6]. When basis contango deepens (IM annualized nearly -24.53%), hedging costs significantly erode Alpha [6].
• Strategy Dismantling: “Boost” and “Stampede” Risks:
  • Boost Upward: When the index rises continuously, the short side suffers rapid losses, and institutions have incentives to close short positions and go long, pushing the index to rise faster (e.g., the process of A500 ETF scale expansion accompanied by initial increase then decrease in index futures short positions) [6].
  • Extreme Stampede: Sudden rise in basis and margin calls trigger cascades when liquidity is exhausted, leading to expanded daily drawdowns of neutral products and increased proportion of limit-down stocks (2025-04-07 case) [7].

V. Regulation and Institutions: “Necessary but Not Sufficient” for Moving Toward U.S. Stock-Style Slow Bull

• Product Line Expansion: R&D progress of STAR 50 stock index futures/options; more cross-period, cross-product, index/ETF options are launched [5]. More diverse risk management and arbitrage tools are conducive to long-term capital entry.
• Long-Term Capital and Tax Incentives: Benchmarking U.S. 401(k) and Japan’s NISA, China’s long-term capital allocation channels like “personal pension” are being cultivated [8].
• Transaction and Disclosure Optimization: ETF fee reduction, margin trading and short selling target expansion, etc., help improve efficiency and reduce transaction friction [5][8].
• Institutional Constraints (Not Fully Achieved):
  • Investor Structure: Natural person account proportion is still extremely high; although capital contribution is decreasing, turnover rate remains high [2][4].
  • Basis Normalization: Contango depth and volatility are still highly correlated with the neutral strategy cycle, and an equilibrium state of “low-cost hedging + stable contango” has not been formed [6][7].
  • Volatility Structure: Lack of normalized release of a unified fear index (e.g., iVIX) and market education; market hedging and pricing efficiency are still evolving [7].

VI. Can It Replicate the U.S. Stock “Slow Rise, Sharp Drop, Slow Bull” Pattern? Conditional Judgment

• Similarities:
  • Clear institutionalization trend (institutional proportion in free float market value has reached 43.98%) and direction of long-term capital inflow [1][4].
  • Increased richness of derivative tools; ETF scale exceeds 5 trillion yuan, with over 100 products exceeding 10 billion yuan, providing a foundation for hedging and asset allocation [5][8].
• Differences (Hard to Replicate in Short Term):
  • U.S. slow bull relies on long-term capital and low turnover, combined with sustained low inflation and deep options market to smooth extreme risks [8]. A-shares still have a higher volatility center, and volatility is more asymmetric in upward and downward phases (higher proportion of boom/decline) [7].
  • U.S. “slow rise” is mainly driven by stable capital inflow, while A-shares are still affected by incremental capital rhythm, policy games, and theme rotations [7][8].
  • The periodicity of basis and neutral strategies will still amplify volatility locally (deep contango of IM and high hedging costs) [6][7].
• Conclusion (Conditional):
  • If long-term capital inflow (pension funds, insurance, FOF, etc.) can be continuously promoted, risk management tools enriched, and excessive reliance of neutral strategies on basis and liquidity effectively reduced, A-shares are expected to gradually evolve toward a slow bull pattern of “lower volatility center + convergence of slow rise and sharp drop” in the next 5-10 years.
  • However, during the transition period of 2025-2030, it will most likely show a mixed pattern of “structural slow rise + local sharp drop + theme rotation”, and it is difficult to simply replicate the U.S. stock’s one-way “slow rise, sharp drop, slow bull” pattern. At the tool level, macro volatility indicators like iVIX need to be improved to more precisely depict changes in risk premium and hedging costs (see below for verification path).

VII. Verification Path and Next-Step Data (Operable)

• Data Supplementation Suggestions:
  • Obtain daily return series of CSI 300/CSI 500/CSI 1000 (2020-2025), calculate overall volatility and segmented volatility (upward/downward) respectively, and compare annual averages and extreme event thresholds [0][7].
  • Obtain iVIX (CSI 300 implied volatility index) or VIX-equivalent series, plot the linkage and deviation between implied volatility and actual volatility, and depict characteristics of different stages of “fear/greed” [7].
  • Obtain time series of basis for main/long-term contracts of stock index futures (IF/IH/IC/IM), superimpose neutral strategy scale and ETF subscription/redemption data, and quantify the causal chain of “hedging demand - basis - volatility” [6][7].
  • Benchmark against U.S. VIX and upward/downward volatility of S&P 500, compare statistical distribution differences between their “slow bear and fast bull” and A-shares’ “slow rise and sharp drop” [7][8].
• Visualization and Analysis (Python/Data End Execution):
  • Plot dual-axis comparison chart of overall volatility and segmented volatility of A-shares/U.S. stocks (2020-2025).
  • Superimpose rolling quantile chart of basis (IF/IH/IC/IM) and neutral strategy scale time series, mark key events (e.g., A500 ETF issuance, IM contango extreme value, 2025-04-07) [6][7].
  • Scatter plot and rolling correlation between iVIX and CSI 300 index, distinguish three scenarios: “fearful drop”, “greedy rise”, “two-way resonance” [7].
• Key Risk Warnings:
  • Data Availability: Segmented volatility of A-shares and long-term unified iVIX series are not fully public; need to supplement through brokerage APIs or third-party data sources.
  • Structural Differences: The speed of institutionalization and policy rhythm (IPO/refinancing, tax and entry thresholds, etc.) have key impacts on the formation of slow bull [1][8].

References
[0] Jinling API Data (^GSPC, ^IXIC, 2020-2025)
[1] Embracing the 15th Five-Year Plan: New Era of Investment, Long-Term Capital Changes | Sina Finance (2025-11-17) — Covers 2014-2024 shareholding structure, institutional proportion, and volatility relationship estimation
[2] A-Shares Investors Exceed 240 Million, Retail Investors Over 99%, Proportion Increasing Year by Year | CLS (2025) — Account count and structure data
[4] Retail Investors’ Number and Capital Proportion in A-Share Market | Fortune Account (2025Q1 Data) — Institutional/retail proportion in free float market value
[5] Shanghai Derivatives Market Forum 2025 Co-Hosted by SHFE and CFFEX | China Fund News (2025-05-23) — Financial futures/options scale and product line expansion
[6] Why Are Stock Index Futures in Deep Contango? | Securities Times (2025-06) — Basis, hedging demand, and neutral strategy scale
[7] Why Do Stable Profit Products Suddenly Zero Out Overnight? | Yousi Wealth (2025) — A-share volatility and implied volatility, extreme event review; The Most Complete Fear Index Collection in History | Gelonghui (2025) — VIX/iVIX comparison between A-shares/Hong Kong stocks/U.S. stocks
[8] Hidden Governance Behind the Stock Market “Slow Bull” | 36Kr (2025) — Impact of institutionalization, long-term capital, and index investment on volatility; Preparing for New Highs? Top 10 Brokerage Strategies This Week | CLS (2025) — Summary of brokerages’ views on slow bull causes and rhythm

Notes and Follow-Up Suggestions

• To avoid judgments beyond evidence, this report strictly marks conclusions supported by clear data (e.g., institutionalization ratio, basis amplitude, volatility estimation) and labels content lacking precise sequence data as “gap” and “needs supplementation”.
• You can authorize further calls to financial data ends and market interfaces to supplement daily closing prices of A-share indices (CSI300/CSI500/CSI1000), daily volatility of the entire market, segmented volatility, and iVIX series for more precise statistical testing of “slow rise/sharp drop” and event studies. If needed, I can immediately organize data calls and Python visualization execution.