Equity Style Cycles - Stylized Facts and International Evidence
The main objective of the paper is to analyze the cyclical structure of style indices and of selected economic time series. After comparing similarities we examine the relationship between the economic indica- tors with the style indices to observe interactions and lead-lag struc- tures. Our method of choice is spectral analysis, which provides richer measures than the ones obtained by looking at correlation coecients in the time domain. Our results indicate that there is indeed cyclical structure in the style indices, dominated by cycles similar to the short Kitchin cycle (3-5 years). These cycles are related to economic indicators like in- dustrial production, price indices and interest rates. We also found a clearly countercyclical relationship between production and prices and the style index cycles. These stylized facts can be used to set the frame for style selection and style rotation based on economic conditions.
|Date of creation:||Mar 2001|
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