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Step #3: U.S. Equity Style Rotation |
Looking at the past experience of a basic style rotation strategy, the results illustrate the significant impact on returns such a strategy may deliver. Below are the decade-by-decade results of a basic style rotation strategy that simply buys the style with the highest 12 month total return at the end of each month. |
In all but one of the past 8 decades, such a strategy produced excess returns versus the S&P 500. Note: we do not manage client assets solely using the simple rules outlined in this backtest. This backtest is for illustrative purposes only. |
Our U.S. Style Rotation strategy periodically measures and ranks the relative strength of 6 investment styles (below) based on our proprietary momentum ranking. We buy the highest ranked style and "rotate out of" (sell) the previous highest ranked style. |
NEXT >> Step #3: Sector Rotation Strategies |
Source Data: Kenneth R French U.S. Research Returns Data. Data set used is the 6 Portfolios Formed on Size and Book-market-Value With Dividends. Styles included in the backtest include Large Value, Large Growth, Small Value and Small Growth. Backtest based on month end results based on 12 month total return. You cannot directly invest in the Fama Index illustrated. Disclaimer: Hypothetical performance results may have limitations described below. They are generally prepared with the benefit of hindsight, do not involve financial risk or reflect actual trading by any account under actual market conditions and therefore do not reflect the impact that economic and market factors may have had on the advisor's investment decisions for that account. No representation is made that IEA's performance would have been the same as such simulated had IEA been in existence during such a time. Another limitation is that the investment decisions reflected in the simulated results cannot completely account for the impact of financial risk on the manner in which an account would have been managed, for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also affect actual trading risks. In fact, there are often sharp differences between hypothetical results and actual record subsequently achieved. The simulated results do not take into account enhancements that may be made to the proprietary computer models over time. There are numerous other factors related to the market in general, or the the implementation of any specific trading program which cannot be fully accounted for in preparation of hypothetical simulated performance results and all of which can adversely effect actual trading results. All results are gross of trading fees, management fees and taxes. |
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