Stock Selection and Analysis

Industry-Based Asset Allocation and Sector Selection

Industry Selection Matters

With factor strategies in vogue, equity strategies based around industry selection receive little attention. Perhaps that in itself is a reason to think again about sector selection processes.

Below, we list a selection of top papers which consider equity portfolio management from a sector perspective.

Savvy Investor

Global Applications of S&P 500® Sectors (S&P Dow Jones Indices, 2018)
This paper examines the applications of U.S. sector indices in a portfolio context. It examines a variety of interesting themes, including the importances of sectors in determining portfolio returns and the effectiveness of sector-section and stock-selection strategies.

Sector by sector: Fidelity International Analyst Survey 2018
(For compliance reasons, this paper is only accessible in the UK & Europe)
Fidelity takes a look at their analysts’ views on industry sectors in this in-depth survey.

Factor-Based v. Industry-Based Asset Allocation: The Contest (Amundi, 2016)
This paper examines sector and factor investing in a contest organized over several trials.

The Impact of the Global Economy on the S&P 500 (S&P Dow Jones Indices, 2018)
The composition of the S&P 500 index is examined with an eye to geographic revenue distribution, in order to see whether foreign economies or geo-specific market-related events materially affect the performance of the index.

Global Tactical Sector Allocation: A Quantitative Approach (Doeswijk and Van Pliet, 2011)
Can investors add value using Global Tactical Sector Allocation (GTSA)? This study examines seven variables to construct a Global Tactical Sector Allocation model.

Sector Selection Based on the Cyclically Adjusted Price-Earnings (CAPE) Ratio (2012)
A sector selection process based upon the CAPE ratio is examined in this paper.

Industry Based Style Investing (Jame and Tong, 2017)
Inspired by the style-investing model in a previous paper authored by Barberis and Shleifer (2003), retail investors’ investment decisions are examined. It is found that industry demand by retail investors is correlated highly with industry return.

Industries undergoing secular change: the top papers on industry disruption (Dec 2017)
A list of the prize-winning papers on industry innovation, from the 2017 Savvy Investor awards.

Overcrowding and capacity in factor investing: Should we be worried? (LGIM, 2018)
(For compliance reasons, this paper is not accessible in the USA or Canada)
Is there overcrowding in investors' exposure to equity risk factors? LGIM examines overcrowding and capacity fears, attempting to provide a better understanding of the issues.