Matt G. Putbrese, Joseph E. Skarbek
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The Flyer Fund uses a top down approach to determine which S&P sectors it should invest in. The general approach is to use macroeconomic indicators (e.g. expected GDP growth) to determine sector weighting. In this study we use measures of relative price movements (relative strength) to determine sector weights. Treating each S&P sector as if it were an individual stock, we create a 10 stock portfolio and compare its performance to the S&P 500 over the period 2008-2012. Our research design calls for the portfolio weighting to be based on the inverse of relative strength for each sector. The approach enables us to give higher weighting to the more undervalued sectors. Rebalancing of sector weights is done at the end of each year in the study.
Robert D. Dean
Primary Advisor's Department
Business-Office of the Dean
Stander Symposium project
"Relative Strength, Sector Weighting, and Sector Returns: A Portfolio Analysis for the Period 2008-2012" (2013). Stander Symposium Projects. 346.