RT Journal Article
SR Electronic
T1 Style Rotation Strategies
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 160
OP 169
DO 10.3905/jpm.2004.160
VO 30
IS 4
A1 Mario Levis
A1 Nicholas Tessaromatis
YR 2004
UL https://pm-research.com/content/30/4/160.abstract
AB Effective implementation of market-timing and style rotation strategies is challenging for an active fund manager. Problem #1 is devising a truly viable forecasting model. Problem #2 is that style rotation has direct implications for portfolio risk constraints and transaction costs; implementation depends moreover on institutional constraints and in-house investment philosophy. Applied using a variety of implementation rules that explicitly control for risk, style rotation strategies can be profitable for investors with different benchmarks and various risk constraints. More specifically, style rotation is as feasible for hedge fund managers who target absolute returns as it is for traditional fund managers who face tight risk constraints. The break-even transaction costs before style rotation strategies become unprofitable are reasonable, especially for fund managers who invest in medium-sized companies.