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In this study, I used a relative price strength model called the Inverse Relative Price Strength (IRPS) to develop a portfolio of 10 sector exchange-traded funds (ETFs) and then compared their performance to the overall market. I used the IRPS model as a proxy for the return risk optimizing process developed by Markowitz et, al. The hypothesis that I am testing is that sectors with lower relative prices compared to the market will have higher excess returns. The hypothesis is tested over the period 2008-2012. This particular period is highly volatile with large swings in both actual and relative prices. In addition, because this period covers the downswing period in 2008, the subsequent rebound period in 2009, and the continued upswing and trading range in 2010-2012, I will be able to evaluate the IRPS model's effectiveness in different phases of the market cycle for the overall portfolio as well as the individual sector ETFs.
Robert Dean, Trevor Collier
Primary Advisor's Department
Economics and Finance
Stander Symposium poster
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Huage, Nate, "Research exercise: S&P 500 Sector Weights: The Case for Inverse Relative Price Strength" (2014). Stander Symposium Posters. 477.
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