A Sector Rotation Strategy That Beats the Market Handily, Especially During Crises
A discussion led by,
Lawrence Pohlman, PhD
(not the T&R Club bartender)
We study a sector rotation strategy that switches among equity sectors, and from equities to bonds, based on signals of a high volatility regime in equities. We find that an implementation of the strategy using highly liquid sector-specific ETFs would have earned 6.6% more than the S&P 500 per year during the period Dec-1998 to Jul-2020, while experiencing much lower volatility. The performance of the strategy is especially strong during crisis periods such as the 1998-2002 crash and recession, the 2008-09 Great Recession, and the current Covid-19 Recession, with much higher and smoother returns than the S&P 500.
Lawrence Pohlman, PhD has a distinguished career covering 30 years of experience in equity, fixed income and asset allocation. He regularly speaks at professional conferences and is widely published in prominent journals. He has taught Investments, Corporate Finance, Fixed Income Management and Advanced Derivatives at Columbia Business School, Northeastern University and University of Massachusetts Boston. Larry was the Director of Research at BMO Global Asset Management, Chief Investment Officer at BNP Paribas Investment Partners, Director of Research at Wellington Management, Director of Research at PanAgora Asset Management, Director of Fixed Income Research at Independence Investment Associates, Vice President at Blackrock Financial Management and Associate in Mortgage Securities Research at Goldman Sachs & Co. He holds 5 degrees (BS Nuclear Engineering, MS in Operations Research, MBA Finance and Management Science, MPhil Finance, PhD Finance) from Columbia University and is a member of the American Finance Association, Boston Security Analysts Society, Econometric Society, the Chicago Quantitative Alliance, QWAFAFEW and MENSA.
Time: 7:00 PM sharpe
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