Market Spin Cycle - The Rotation Continues...

Jul 14, 2014

In "Market Spin-cycle: Uncovering Style and Sector Rotation in a Flat Market", we investigated the sector and investment style rotations in the US market from March 1st through May 8th, 2014. In particular, we identified declining performance in growth-oriented styles associated with risk-taking behavior, such as Beta, Growth, and Momentum, with improving performance in Value, Profitability, and Size suggesting rotation in investment styles.

In this follow-up paper, we extend this analysis through the end of June 30th, 2014 and observe a significant reversal in the rotation in investment styles seen between March 1st and May 8th, 2014. Using MSCI Barra models, we identify a decline in performance of quality-oriented investment styles that appeal to risk-averse investors, such as Asset Turnover, Profitability, Earnings Quality, Value and Size[1] and an outperformance of Beta, Growth, Momentum, and Residual Volatility, growth-oriented investment styles that are associated with risk-taking behavior.