Year: 2025
Type: article
Abstract: This study evaluates the effectiveness of a median sector rotation strategy within the Nikkei 500 component sectors, building on prior research that demonstrated superior risk-adjusted returns by selecting midperforming assets. Unlike traditional momentum-based investing, which focuses on winners or losers, the median strategy systematically reallocates capital to sectors with moderate past performance, reducing volatility while maintaining steady growth. Our findings reveal that quarterly and semi-annual rebalancing optimize returns in Japan, differing from U.S.-based studies where monthly rebalancing was more effective. Unlike buy-and-hold investing, the median strategy tends to outperforms total return and drawdown reduction, making it a viable alternative for public investors. By applying structured sector rotation rather than passive indexing, investors gain exposure to Japan’s strongest industries while mitigating downside risk. The results highlight the strategy’s adaptability across markets and suggest broader applications in global equities, fixed income, and multi-asset portfolios for enhanced portfolio resilience.
Authors: Sreeya Kotrakona, Natasya Liew, Eugene Pinsky
Institution: Boston University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4410048313