@article {Cavaglia35, author = {Stefano M.F.G Cavaglia and David Cho and Brian D Singer}, title = {Risks of Sector Rotation Strategies}, volume = {27}, number = {4}, pages = {35--44}, year = {2001}, doi = {10.3905/jpm.2001.319811}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Global factors are playing an increasingly important role in the pricing of securities. It is a new challenge to identify the sources of those global factors and to structure portfolios that exploit the reward{\textendash}to{\textendash}risk opportunities from variation in these factors. The authors build on research suggesting that industry factors capture an economically important component of the variation in security returns. Postulating a risk model that explicitly accounts for regional sector rotation decisions, they find that sensitivities to foreign factors are positively associated with the extent of firms{\textquoteright} foreign sales activities. This provides empirical support for a reduced{\textendash}form structural model, and it suggests that foreign sales data can be used as a conditioning variable to obtain economically sensible risk factor sensitivities.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/27/4/35}, eprint = {https://jpm.pm-research.com/content/27/4/35.full.pdf}, journal = {The Journal of Portfolio Management} }