The myth of business cycle sector rotation

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dc.citation.volumeEarly View
dc.contributor.authorMolchanov A
dc.contributor.authorStangl J
dc.date.accessioned2024-05-17T03:03:58Z
dc.date.available2024-05-17T03:03:58Z
dc.date.issued2023-09-06
dc.description.abstractConventional wisdom suggests that sectors/industries provide systematic performance and that business cycle rotation strategies generate excess market performance. However, we find no evidence of systematic sector performance where popular belief anticipates it will occur. At best, conventional sector rotation generates modest outperformance, which quickly diminishes after allowing for transaction costs and incorrectly timing the business cycle. The results are robust to alternative sector and business cycle definitions. We find that relaxing sector rotation assumptions and letting any industry excess return predict future returns of other industries results in predictability not significantly different than what would be expected by random chance.
dc.description.confidentialfalse
dc.format.pagination1-24
dc.identifier.citationMolchanov A, Stangl J. (2023). The myth of business cycle sector rotation. International Journal of Finance and Economics. Early View. (pp. 1-24).
dc.identifier.doi10.1002/ijfe.2882
dc.identifier.eissn1099-1158
dc.identifier.elements-typejournal-article
dc.identifier.issn1076-9307
dc.identifier.urihttps://mro.massey.ac.nz/handle/10179/69590
dc.languageEnglish
dc.publisherJohn Wiley and Sons Ltd.
dc.publisher.urihttps://onlinelibrary.wiley.com/doi/10.1002/ijfe.2882
dc.relation.isPartOfInternational Journal of Finance and Economics
dc.rights(c) 2023 The Author/s
dc.rightsCC BY 4.0
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.subjectbusiness cycle
dc.subjectindustry investments
dc.subjectinvestments
dc.subjectmarket efficiency
dc.subjectreturn predictability
dc.subjectsector rotation
dc.titleThe myth of business cycle sector rotation
dc.typeJournal article
pubs.elements-id480526
pubs.organisational-groupOther
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