Journal of Asset Management

, Volume 12, Issue 6, pp 407–417 | Cite as

Style investing and momentum investing: A case study

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Abstract

We examine whether an investor should choose a style rotation strategy (that is style investing) rather than a buy-and-hold strategy or a momentum strategy. We run out-of-sample forecasting/investing horse races between style rotation strategies (based on logit models), simple momentum strategies and buy-and-hold strategies. Regarding style rotation strategies, we consider switches between value and growth indexes, and small-cap and large-cap indexes. To gain a long-term perspective, we use the freely available Fama–French data set, which segments US stocks into value and growth stocks, and small-cap and large-cap stocks. Although the choice of variables to include in the logit models and the investment outcomes depend on the indexes (style switches) under review, our study shows that style switching gives interesting investment results.

Keywords

style switching momentum investing value and growth stocks small-cap and large-cap stocks 
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Notes

Acknowledgements

The authors thank the National Bank of Belgium for a research grant that helped them with the data and empirical analysis. All scientific reponsibilities are assumed by the authors.

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Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Ltd 2011

Authors and Affiliations

  1. 1.University of Namur; CORE, Université catholique de LouvainBelgium

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