The Profitability of Style Rotation Strategies in the United Kingdom

Levis, Mario; Liodakis, Manolis

doi:10.3905/jpm.1999.319770

Cited by 83 publications

(58 citation statements)

References 13 publications

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“…Similar to Levis and Liodakis (1999) for the United Kingdom, and Cooper et al (2001) for the United States, we provide reasonable support for small versus large, but less for value versus growth style rotation strategies in Japan. Our findings furthermore imply there are several key factors that determine the profitability of style switching strategies in the Japanese market.…”

Section: Concluding Commentsmentioning

confidence: 87%

“…Levis and Liodakis (1999) find moderate evidence in favor of small/large rotation strategies, but less evidence for value/growth rotation in the United Kingdom. Consistent with their findings, Cooper et al (2001) find sufficient predictability for size-sorted strategies to succeed, but weaker results for valuesorted strategies in the United States.…”

Section: Introductionmentioning

confidence: 86%

“…Levis and Liodakis (1999) use variables such as inflation, the term spread and the equity premium to forecast directional changes in the size and value premium in the United Kingdom. Kao and Shumaker (1999) use GDP forecasts, inflation, and several interest rate variables to explore the benefits of value/growth timing in the United States.…”

Section: Choice Of Base Set Of Forecasting Variablesmentioning

confidence: 99%

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The Real-Time Predictability of the Size and Value Premium in Japan

Bauer

Derwall

Molenaar³

2002

SSRN Journal

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This study examines whether the short-term variation in the Japanese size and value premium is sufficiently predictable to be exploited by a timing strategy. In the spirit of Pesaran and Timmermann [J. Finance 50 (1995) 1201], we employ a dynamic modeling approach in which we explicitly allow for permutations among the determinants in order to mitigate typical data-snooping biases. Using a base set of candidate regressors, we perform an in-sample estimation of all economically sensible models. Subsequently, a ''best'' model is determined according to a selection criterion. However, whereas most studies use in-sample model selection criteria, we introduce an out-of-sample training period to select our models. We then implement our strategy in a second-stage out-of-sample period: the trading period. All stages re-occur on a monthly basis via a rolling window framework. The results confirm sufficient predictability under lower transaction cost levels. Under high transaction costs scenarios it is more difficult to obtain incremental benefits. D

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Section: Concluding Commentsmentioning

confidence: 87%

Section: Introductionmentioning

confidence: 86%

Section: Choice Of Base Set Of Forecasting Variablesmentioning

confidence: 99%

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The Real-Time Predictability of the Size and Value Premium in Japan

Bauer

Derwall

Molenaar³

2002

SSRN Journal

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“…Similar studies assert that while style consistency is reasonable for long-term investors with strong opinions on the returns of specific styles, carefully considered style rotations can indeed be value-enhancing (Levis & Liodakis, 1999;Zhao, 2009). …”

Section: Marble Research Papersmentioning

confidence: 99%

Mutual Fund Investment Style Consistency and Risk-adjusted Performance

Loick¹

2017

MARBLE

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While it is commonly agreed on that a mutual fund´s investment style influences its returns to investors, academia has not fully explored the relationship between a mutual fund´s consistency with its stated investment style and risk-adjusted performance. The study at hand employs a novel consistency ratio by means of the return-based style analysis for U.S. equity mutual funds to investigate that relationship. Based on their consistency scores, mutual funds are subsequently divided into quintiles and compared for their riskadjusted performance. Evidence is found that investment style consistency does influence risk-adjusted returns and that the financial crisis had a major impact on that relation. While a convex curve describes the relationship between style consistency and fund performance before the financial crisis, it reversed into a concave curve afterwards. This study contributes to current research by going beyond a linear relationship between mutual fund investment style consistency and risk-adjusted performance, commonly assumed in prior studies.

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“…In particular, Fan [1995], Sorensen and Lazzara [1995], Kao and Shumaker [1999], Avramov [2002] or Bauer and Molenaar [2002] report strong evidence of predictability in equity style returns and underline the performance of strategies that involves dynamic trading in various equity styles. Related pa pers also include Gerber [1994], Case and Cusimano [1995], Fisher, Toms and Blount [1995], Mott and Condon [1995], Levis and Liodakis [1999], Oertmann [1999], Reiganum [1999], Amenc and Martellini [2001], Cooper et al [2001], Ahmed, Lockwood and Nanda [2002], or Amenc, El Bied and Martellini [2003].…”

Section: Exhibit 1: Classification Of Active Portfolio Strategiesmentioning

confidence: 99%

Tactical Style Allocation—A New Form of Market Neutral Strategy

Amenc¹,

Malaise²,

Martellini

et al. 2003

JAI

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Abstract:Even though there is little evidence of predictability in stock specific risk, most equity m arket neutral managers still rely on stock picking as the preferred way to generate abnormal returns. In this paper, we document the benefits of a new form of market-neutral portfolio strategy that aims at delivering absolute return over the full business cycle through systematic equity style timing decisions. Using a robust multi-factor recursive modeling approach, we find strong evidence of predictability in value and size style differentials. We use these econometric forecasts to generate systematic style timing allocation decisions. These portfolio decisions can be implemented using Exchange Traded Funds on US style indexes.Edhec is one of the top five business schools in France owing to the high quality of its academic staff (90 permanent lecturers from France and abroad) and its privileged relationship with professionals that the school has been developing since its establishment in 1906. Edhec Business School has decided to draw on its extensive knowledge of the professional environment and has therefore concentrated its research on themes that satisfy the needs of professionals. Edhec implements an active research policy in the field of finance. Its "Risk and Asset Management research centre" carries out numerous research programs in the areas of asset allocation and risk management in both the traditional and alternative investment universes.

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The Profitability of Style Rotation Strategies in the United Kingdom

Cited by 83 publications

References 13 publications

The Real-Time Predictability of the Size and Value Premium in Japan

The Real-Time Predictability of the Size and Value Premium in Japan

Mutual Fund Investment Style Consistency and Risk-adjusted Performance

Tactical Style Allocation—A New Form of Market Neutral Strategy

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