In last week's commentary, we found that the returns of a value-based sector rotation strategy appeared to largely be driven by momentum.
This week, we test momentum-based sector rotation explicitly (PDF).
As with last week, the initial results are not quite what they seem.
🎧 LISTEN: Flirting with Models – Chris Meredith – Building a Robust Research Platform (S2E10)
Read of the Week
→ GLOBAL SECTORS: "We document significant returns for momentum (1-month and 12-1 month), earnings revisions and Sell in May seasonal, also after their publication dates. By contrast, monetary policy and valuation (mean-reversion and dividend yield) fail to predict global sector returns. Our out-of-sample tests reveal an average decay in performance of about one third." Global Tactical Sector Allocation: A Quantitative Approach
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