Sector Rotation by Factor Model and Fundamental Analysis

Runjia Yang; Beining Shi

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arXiv · 2401.00001

Sector Rotation by Factor Model and Fundamental Analysis

Runjia Yang·Beining Shi

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Abstract

This study presents an analytical approach to sector rotation, leveraging both factor models and fundamental metrics. We initiate with a systematic classification of sectors, followed by an empirical investigation into their returns. Through factor analysis, the paper underscores the significance of momentum and short-term reversion in dictating sectoral shifts. A subsequent in-depth fundamental analysis evaluates metrics such as PE, PB, EV-to-EBITDA, Dividend Yield, among others. Our primary contribution lies in developing a predictive framework based on these fundamental indicators. The constructed models, post rigorous training, exhibit noteworthy predictive capabilities. The findings furnish a nuanced understanding of sector rotation strategies, with implications for asset management and portfolio construction in the financial domain.

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Runjia Yang, Beining Shi. 2023-11-18. Sector Rotation by Factor Model and Fundamental Analysis. https://arxiv.org/abs/2401.00001

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