Practical Applications of Is There Value in Valuation?

Abstract

Sector rotation strategies are gaining fans among the ranks of portfolio managers, with some relying on valuation as key to predicting the best-performing sector. However, little of the research has considered the impact o using valuation as a selection criterion.

In Is There Value in Valuation? , which was published in the Winter 2013 issue of The Journal of Portfolio Management , the authors find that applying a robust valuation model to ratings groups of high-yield bonds does not definitively add value in sector rotation portfolios.

In this Practical Applications report, Co-Authors Martin Fridson, Chief Executive Officer of FridsonVision LLC, and John D. Finnerty, Professor of Finance at Fordham University, recommend investors in other asset classes adapt their model to test whether a “rich and cheap” sector rotation valuation strategy adds to total return.

The article has been gaining attention in the broader media. Most recently, www.CBSNews.com picked it up: Can you Profit From Valuation?

TOPICS: Fundamental equity analysis, in markets, information providers/credit ratings