Dynamic Asset Allocation Using Systematic Sector Rotation

Abstract

The authors build on the insight that sectors perform differently from, and to a certain extent independently of, each other over the phases of the economic cycle to test heuristic investment rules of systematic sector rotation. Using 3 simple market-timing techniques on 41 funds of the Fidelity Select Sector family over the period January 1998–September 2003, the authors' approach always outperforms market returns.