IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v12y2011i6d10.1057_jam.2011.28.html
   My bibliography  Save this article

Style investing and momentum investing: A case study

Author

Listed:
  • Sandrine de Moerloose
  • Pierre Giot

    (University of Namur; CORE, Université catholique de Louvain)

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.

Suggested Citation

  • Sandrine de Moerloose & Pierre Giot, 2011. "Style investing and momentum investing: A case study," Journal of Asset Management, Palgrave Macmillan, vol. 12(6), pages 407-417, December.
    • Handle: RePEc:pal:assmgt:v:12:y:2011:i:6:d:10.1057_jam.2011.28
    DOI: 10.1057/jam.2011.28
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/jam.2011.28
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/jam.2011.28?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lucas, Andre & van Dijk, Ronald & Kloek, Teun, 2002. "Stock selection, style rotation, and risk," Journal of Empirical Finance, Elsevier, vol. 9(1), pages 1-34, January.
    2. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    3. Bala G Arshanapalli & Lorne N Switzer & Karim Panju, 2007. "Equity-style timing: A multi-style rotation model for the Russell large-cap and small-cap growth and value style indexes," Journal of Asset Management, Palgrave Macmillan, vol. 8(1), pages 9-23, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dewandaru, Ginanjar & Masih, Rumi & Bacha, Obiyathulla Ismath & Masih, A. Mansur. M., 2015. "Combining momentum, value, and quality for the Islamic equity portfolio: Multi-style rotation strategies using augmented Black Litterman factor model," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 205-232.
    2. Andrew Clare & Svetlana Sapuric & Natasa Todorovic, 2010. "Quantitative or momentum-based multi-style rotation? UK experience," Journal of Asset Management, Palgrave Macmillan, vol. 10(6), pages 370-381, February.
    3. Chou, Pin-Huang & Ko, Kuan-Cheng & Yang, Nien-Tzu, 2019. "Asset growth, style investing, and momentum," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 108-124.
    4. I-Cheng Yeh & Tzu-Kuang Hsu, 2011. "Growth Value Two-Factor Model," Journal of Asset Management, Palgrave Macmillan, vol. 11(6), pages 435-451, February.
    5. Bauer, Rob & Derwall, Jeroen & Molenaar, Roderick, 2004. "The real-time predictability of the size and value premium in Japan," Pacific-Basin Finance Journal, Elsevier, vol. 12(5), pages 503-523, November.
    6. Manuel Ammann & Michael Verhofen, 2006. "The Effect of Market Regimes on Style Allocation," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 20(3), pages 309-337, September.
    7. Wolfgang Drobetz & Rebekka Haller & Christian Jasperneite & Tizian Otto, 2019. "Predictability and the cross section of expected returns: evidence from the European stock market," Journal of Asset Management, Palgrave Macmillan, vol. 20(7), pages 508-533, December.
    8. Chen, Hsiu-Lang & De Bondt, Werner, 2004. "Style momentum within the S&P-500 index," Journal of Empirical Finance, Elsevier, vol. 11(4), pages 483-507, September.
    9. Zugang Liu & Jia Wang, 2018. "Do Style Momentum Strategies Produce Abnormal Returns: Evidence From Index Investing," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 12(2), pages 63-75.
    10. Georgi Nalbantov & Rob Bauer & Ida Sprinkhuizen-Kuyper, 2006. "Equity style timing using support vector regressions," Applied Financial Economics, Taylor & Francis Journals, vol. 16(15), pages 1095-1111.
    11. Thorsten Hock, 2010. "Tactical Size Rotation in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(III), pages 553-576, September.
    12. Chen Su, 2021. "A comprehensive investigation into style momentum strategies in China," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(1), pages 101-144, March.
    13. Chao, Hsiao-Ying & Collver, Charles & Limthanakom, Natcha, 2012. "Global style momentum," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 319-333.
    14. Mohan Subbiah & Frank J Fabozzi, 2016. "Equity style allocation: A nonparametric approach," Journal of Asset Management, Palgrave Macmillan, vol. 17(3), pages 141-164, May.
    15. Harrison Hong & Terence Lim & Jeremy C. Stein, 2000. "Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies," Journal of Finance, American Finance Association, vol. 55(1), pages 265-295, February.
    16. Berg, Joyce E. & Rietz, Thomas A., 2019. "Longshots, overconfidence and efficiency on the Iowa Electronic Market," International Journal of Forecasting, Elsevier, vol. 35(1), pages 271-287.
    17. Zhao Zhao & Olivier Ledoit & Hui Jiang, 2019. "Risk reduction and efficiency increase in large portfolios: leverage and shrinkage," ECON - Working Papers 328, Department of Economics - University of Zurich, revised Jan 2020.
    18. Pradosh Simlai, 2009. "Stock returns, size, and book‐to‐market equity," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 26(3), pages 198-212, July.
    19. Rojahn, Joachim & Röhl, Christian W. & Frère, Eric, 2010. "Optimum Portfolio ETF Indices: Benchmarking für multidimensional diversifizierte Wertpapierportfolios," Berichte aus der Forschung der FOM 75202, FOM Hochschule für Oekonomie & Management.
    20. Charles Cao & Grant Farnsworth & Hong Zhang, 2021. "The Economics of Hedge Fund Startups: Theory and Empirical Evidence," Journal of Finance, American Finance Association, vol. 76(3), pages 1427-1469, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:12:y:2011:i:6:d:10.1057_jam.2011.28. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.