Cross-Region, Cross-Sector Asset Allocation with Regimes

Dou, Yiwen; Gallagher, David R.; Schneider, David; Walter, Terry S.

doi:10.2139/ssrn.1655525

Cited by 4 publications

(7 citation statements)

References 36 publications

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“…However, these findings are similar to relatively recent literature focusing on sector performance and sector selectivity like the findings of Sarwara, Mateusa & Todorovic (2017) and Dou et al (2014), both of which reported a net positive alpha for energy and health care sectors; and negative alphas for consumer staples and industrial sectors.…”

Section: Sector Rotation Based On Rolling Regressionsupporting

confidence: 91%

“…In contrast, Dou et al (2014) studied cross-regional and cross-sectoral asset allocation in both bullish and bearish market and reported net positive alpha for Energy, Technology, and Healthcare sectors; and negative alphas for Durable, Telecom, and Manufacturing sectors. In a study to understand the impact of business cycles on stock returns, Chordia and Shivakumar (2002) found that momentum driven trading strategies were only able to statistically outperform the market during periods of expansion however it failed to perform equally well during periods of recession.…”

Section: Related Literaturementioning

confidence: 97%

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Gauging the effectiveness of sector rotation strategies: evidence from the USA and Europe

Alexiou

Tyagi²

2020

J Asset Manag

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This paper examines the performance of different sector rotation strategies for the U.S. and European market spanning the period 1999 to 2019. By utilising three different strategies we shed further light on the effectiveness of interest rate, momentum, & Fama-French 3 and 5 factor alphas as switching signals to enter and exit a particular sector. The emerging evidence suggests that within the European market, sector rotation strategies tend to produce returns above the average benchmark, both during contractionary and expansionary monetary policy regimes, whilst excessive returns within both the US and European markets are observed.

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Section: Sector Rotation Based On Rolling Regressionsupporting

confidence: 91%

Section: Related Literaturementioning

confidence: 97%

Gauging the effectiveness of sector rotation strategies: evidence from the USA and Europe

Alexiou

Tyagi²

2020

J Asset Manag

View full text Add to dashboard Cite

show abstract

“…However, their positive alpha is the average alpha of 35 sector funds, but they didn't specify sectors with positive and negative alphas. Dou et al (2014) use the MSCI data and report positive alpha of Energy, HiTech, and Health sectors; and negative alphas of Durable and 9…”

Section: Performance Of Sector Portfoliosmentioning

confidence: 99%

“…They argue that, fund managers may deviate from the passive market portfolio by having their portfolio with specific industry concentration, and prove that funds that deviate more from the overall market by focusing on particular industries tend to perform better. Dou et al (2014) study asset allocation in different economic regimes across sectors in the developed countries (North America, UK, Japan, and Europe). They report positive alpha of Energy, HiTech, and Health sectors; and negative alphas of Durable, Telecom, and Manufacturing sectors both in the bull market and the bear market.…”

Section: Introductionmentioning

confidence: 99%

“…Further, Chong and Philips (2015) find that a portfolio of sector ETFs constructed as a response of sectors to economic factors performs well relative to S&P 500 index. Outperformance of sector rotation strategy is also documented in the study of Baca, Garbe and Weiss (2000); Conover et al (2005); Shynkevich (2013) and Dou et al (2014). Sector rotation studies differ, among other things, in indicators used to signal a switch from one sector to another.…”

Section: Introductionmentioning

confidence: 99%

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US Sector Rotation with Five-Factor Fama-French Alphas

2017

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In this paper we investigate the risk-adjusted performance of US sector portfolios and sector rotation strategy using the alphas from the Fama-French five factor model. We find that fivefactor model fits better the returns of US sector portfolios than the three factor model, but that significant alphas are still present in all the sectors at some point in time. In the full sample period, 50% of sectors generate significant five-factor alpha. We test if such alpha signifies a true sector out/underperformance by applying simple long-only and long-short sector rotation strategies. Our long-only sector rotation strategy that buys a sector with a positive five-factor alpha generates four times higher Sharpe ratio than the S&P500 buy-and-hold. If the strategy is adjusted to switch to the risk-free asset in recessions, the Sharpe ratio achieved is tenfold that of the buy-and-hold. The long-short strategy fares less well.

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Are the Industry Cycles the Global Trend in Investment Activity?

et al. 2021

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Research background: According to the concept of sector rotation, industry cycles affect the investment attractiveness of companies. Industry cycles relate to business ones, and specific industries are preferred for investors depending on the phase of the latter. The scope of this concept application is portfolio investment management. However, we use it in a new way, assuming that the unfavourable phase leads to a decrease in the investment activity of companies in the corresponding industry. Purpose of the article: Since the concept of sector rotation claims universality, we reveal if the industry cycles are the global trend in investment activity. The research purpose is to test the hypothesis of an industry cycles’ impact on the dynamics of the investment activity in companies obtaining external financing. Methods: Using the concept of sector rotation, we suggest several industry groups and tested whether the peak of investment activity in each group falls on the expected favourable phase of the business cycle. In the context of global investment trends, this hypothesis should be confirmed at public companies of any sufficiently large financial market. For testing, Russian companies were selected. The growth rate of capital investments was used as an indicator of investment activity. Findings & Value added: It was revealed that the hypothesis about the impact of industry cycles on the investment activity of a business has the potential for further research. However, there is no sufficient evidence to consider the orientation of the investment behaviour of companies on industry cycles as a global trend.

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Cross-Region, Cross-Sector Asset Allocation with Regimes

Cited by 4 publications

References 36 publications

Gauging the effectiveness of sector rotation strategies: evidence from the USA and Europe

Gauging the effectiveness of sector rotation strategies: evidence from the USA and Europe

US Sector Rotation with Five-Factor Fama-French Alphas

Are the Industry Cycles the Global Trend in Investment Activity?

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