Style investing and momentum investing: A case study
Style investing and momentum investing: A case study
By: Sandrine De Moerloose and Pierre Giot
Abstract
We examine whether an investor should choose a style rotation strategy (that is style investing) rather than a buy-and-hold strategy or a momentum strategy. We run out-of-sample forecasting/investing horse races between style rotation strategies (based on logit models), simple momentum strategies and buy-and-hold strategies. Regarding style rotation strategies, we consider switches between value and growth indexes, and small-cap and large-cap indexes. To gain a long-term perspective, we use the freely available Fama–French data set, which segments US stocks into value and growth stocks, and small-cap and large-cap stocks. Although the choice of variables to include in the logit models and the investment outcomes depend on the indexes (style switches) under review, our study shows that style switching gives interesting investment results.
Source: Journal of Asset Management advance online publication 19 May 2011; doi: 10.1057/jam.2011.28
