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

Alexiou, Constantinos; Tyagi, Anshul

doi:10.1057/s41260-020-00161-6

Cited by 7 publications

(2 citation statements)

References 55 publications

(47 reference statements)

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“…Positive conclusions on the advisability of applying the concept of sectoral rotation in investment portfolio management are presented in the works of Stangl et al [4], Wyatt and Kee [8] and in others. A research made by Alexiou and Tyagi [9] shows that the concept is still relevant, allowing investors to generate excess returns within the framework of the mature market. However, the implementation of the concept is characterized by significant diversity, and a fairly solid body of research is devoted to recommendations in this area.…”

Section: Introductionmentioning

confidence: 99%

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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Section: Introductionmentioning

confidence: 99%

Are the Industry Cycles the Global Trend in Investment Activity?

et al. 2021

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“…Recent studies have shown the importance of the influence on the investment behaviour of a business exerted by such factors as stage of the organization's life cycle (Ivanov et al, 2018), type of economic activity (Alexiou & Tyagi, 2020), general level of corporate taxation (Steinmuller et al, 2019), company size (Zwick & Mahon, 2017). This means that tax incentives for investment should be based on differentiated instruments that take into account the business climate.…”

Section: Introductionmentioning

confidence: 99%

Developing Regional Mechanisms Of Tax Incentives For Investment Activity Of Russian Business

Иванов¹,

Львова²,

Андрианов³

2021

Global Challenges and Prospects of the Modern Economic Development Proceedings of Global Challenges and Prospects of the Modern

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The myth of business cycle sector rotation

Molchanov,

Stangl

2023

Int. J Fin Econ

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Conventional wisdom suggests that sectors/industries provide systematic performance and that business cycle rotation strategies generate excess market performance. However, we find no evidence of systematic sector performance where popular belief anticipates it will occur. At best, conventional sector rotation generates modest outperformance, which quickly diminishes after allowing for transaction costs and incorrectly timing the business cycle. The results are robust to alternative sector and business cycle definitions. We find that relaxing sector rotation assumptions and letting any industry excess return predict future returns of other industries results in predictability not significantly different than what would be expected by random chance.

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

Cited by 7 publications

References 55 publications

Are the Industry Cycles the Global Trend in Investment Activity?

Are the Industry Cycles the Global Trend in Investment Activity?

Developing Regional Mechanisms Of Tax Incentives For Investment Activity Of Russian Business

The myth of business cycle sector rotation

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