RT Journal Article
SR Electronic
T1 Global Tactical Sector Allocation: A Quantitative
Approach
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 29
OP 47
DO 10.3905/jpm.2011.38.1.029
VO 38
IS 1
A1 Ronald Doeswijk
A1 Pim van Vliet
YR 2011
UL https://pm-research.com/content/38/1/29.abstract
AB Doeswijk and vanVliet examine seven variables for global tactical sector allocation (GTSA) purposes. They construct 10 global sector indices over the extended sample period from 1970 to 2008, enabling them to test previously documented variables on a global basis and to examine whether they continued to work after their publication dates. Doeswijk and van Vliet document significant returns for the following strategies: 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. The authors’ out-of-sample tests reveal an average decay in performance of about one-third. A long–short GTSA strategy that combines momentum with seasonal has an annual success ratio of 82% and delivers a compounded annual return of 9.9% after transaction costs. The authors believe that a global sector allocation study with such a long sample period and with such a broad range of variables has not been conducted before.TOPICS: Portfolio construction, accounting and ratio analysis