building-capital-markets
THEME: CAPITAL MARKETS
25 May 2023 Financial Analysts Journal Volume 79, Issue 3

Time-Series Predictability for Sector Investing

  1. Jin Suk Park
  2. Mohammad Khaleq Newaz
This study identifies key indicators that can help investors select sectors with stronger time-series predictability and ultimately lead to economic benefits.
Read the Complete Article in the Financial Analysts Journal CFA Institute Member Content

Abstract

This study identifies the indicators of sector-level time-series predictability. The results show that investors can expect higher predictability in the more volatile sectors. In the developed markets, price downtrends, lower trading volume, and higher dividend yields indicate stronger predictability. 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.

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