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

Author

Listed:
  • Constantinos Alexiou

    (Cranfield University)

  • Anshul Tyagi

    (Carlsquare)

Abstract

This paper examines the performance of different sector rotation strategies for the US and European market spanning the period 1999–2019. By utilising three different strategies, we shed further light on the effectiveness of interest rate, momentum and Fama–French three- and five-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, while excessive returns within both the US and European markets are observed.

Suggested Citation

  • Constantinos Alexiou & Anshul Tyagi, 2020. "Gauging the effectiveness of sector rotation strategies: evidence from the USA and Europe," Journal of Asset Management, Palgrave Macmillan, vol. 21(3), pages 239-260, May.
    • Handle: RePEc:pal:assmgt:v:21:y:2020:i:3:d:10.1057_s41260-020-00161-6
    DOI: 10.1057/s41260-020-00161-6
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    More about this item

    Keywords

    Sector rotation; Fama–French; Momentum; Interest rate; Business cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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