Conditional style rotation model on enhanced value and growth portfolios: The European experience | Zendy

Ron Bird | Zendy; Lorenzo Casavecchia | Zendy

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Conditional style rotation model on enhanced value and growth portfolios: The European experience

Author(s) -

Ron Bird,

Lorenzo Casavecchia

Publication year - 2011

Publication title -

journal of asset management

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.362

H-Index - 16

eISSN - 1479-179X

pISSN - 1470-8272

DOI - 10.1057/jam.2009.34

Subject(s) - portfolio , valuation (finance) , value (mathematics) , value at risk , economics , value premium , growth stock , econometrics , rotation (mathematics) , financial economics , style investing , risk management , capital asset pricing model , stock market , mathematics , finance , statistics , paleontology , geometry , market maker , horse , biology

This article analyses the extent of the excess returns that can be generated within the European markets by rotating one's portfolio between value and growth stocks. Academic and professional attention has been devoted in the past to the analysis of the potential value-enhancement generated by rotation strategies based on macroeconomic models and applied to value and growth portfolios and/or indexes. We demonstrate that such models can be employed successfully to rotate between value and growth portfolios that are formed using traditional valuation metrics. However, we find that the value-enhancing potential of such rotation strategies is eroded when the value and growth portfolios are themselves enhanced using market sentiment and financial health indicators.16 page(s

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