Time-Series Predictability for Sector Investing

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Abstract

This study identifies the indicators of sector-level time-series predictability. Our results show that investors can expect higher predictability in more volatile sectors. In the developed markets, price downtrends, lower trading volume, and higher dividend yields indicate stronger predictability. On the other hand, the cyclical and sensitive super-sectors become more predictable as liquidity goes down. Particularly in the cyclical super-sectors, smaller market capitalization and larger term spread also indicate predictability. Sector selection based on the indicators can generate economic benefits.
Original languageEnglish
Pages (from-to)136-154
Number of pages19
JournalFinancial Analysts Journal
Volume79
Issue number3
Early online date18 May 2023
DOIs
Publication statusPublished - 2023

Bibliographical note

This is an Open Access article distributed under the terms of the Creative Commons Attribution-Non-commercial-No Derivatives License(http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in anyway. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent

Keywords

  • forecasting accuracy
  • industry selection
  • return predictability

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