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    Modeling style rotation: switching and re-switching

    Golosov, Edward and Satchell, Stephen E. (2012) Modeling style rotation: switching and re-switching. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    The purpose of this paper is to investigate the dynamics and statistics of style rotation based on the Barberis-Shleifer model of style switching. Investors in stocks regard the forecasting of style-relative performance, especially style rotation, as highly desirable but difficult to achieve in practice. Whilst we do not claim to be able to do this in an empirical sense, we do provide a framework for addressing these issues. We develop some new results from the Barberis-Shleifer model which allows us to understand some of the time series properties of style relative price performance and determine the statistical properties of the time until a switch between styles. We apply our results to a set of empirical data to get estimates of some of the model parameters including the level of risk aversion of market participants.

    Metadata

    Item Type: Monograph (Working Paper)
    Keyword(s) / Subject(s): Market dynamics, asset prices, style rotation, momentum investing
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 11 Jan 2013 13:24
    Last Modified: 17 Apr 2013 12:33
    URI: http://eprints.bbk.ac.uk/id/eprint/5956

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