TY - JOUR T1 - Industry Rotation and Time-Varying Sensitivity by VIX JF - The Journal of Portfolio Management SP - 89 LP - 97 DO - 10.3905/jpm.2018.44.6.089 VL - 44 IS - 6 AU - Maggie Copeland AU - Michael Copeland AU - Thomas Copeland Y1 - 2018/06/30 UR - https://pm-research.com/content/44/6/89.abstract N2 - In this article, the authors, one of whom was a doctoral student of Stephen A. Ross, investigate the cross section of industry returns and the effect of uncertainty as proxied by the VIX index. They find that different moments of the distribution of cross-sectional returns for industries are significantly correlated to both the change in VIX and the level of VIX. Furthermore, the size effect diminishes after controlling for the industry effect. The sensitivity to the change in VIX is time varying. Different VIX regimes and different events can alter industry sensitivities. Non-stationarity of the sensitivity may also introduce complexity on factor or smart beta strategies, which tilt toward a favorable risk premium factor. Finally, the authors propose a general approach for industry rotation.TOPICS: Analysis of individual factors/risk premia, quantitative methods ER -