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The UK Stock Market Almanac 2016: Seasonality analysis and studies of market anomalies to give you an edge in the year ahead by Stephen Eckett

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Quarterly sector (hedge) strategy

On page 84 we saw the performance of a strategy cycling investment in historically strong sectors through the calendar quarters. On this page we look at enhancing that strategy by, in each quarter, going long of the strong sector and hedging that by also going short of the quarter’s weak sector.

First, the weak sectors for each quarter are shown in the table (with a recap of the strong sectors).

Quarter

Strong

Weak

1st

Industrial Engineering

Pharma & Biotech

2nd

Electricity

Construction & Materials

3rd

Software & Comp Srvs

Oil & Gas Producers

4th

Beverages

Banks

As before, the strategy trades just four times a year. For example, in Q1 the strategy would ...

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