Author(s):Jinzhi Zhang, Chenxi Zhao

Doi: 10.7508/aiem.04.2024.321.333

This is an open access article distributed under the Creative Commons Attribution License CC BY 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Market conditions are difficult to predict accurately. Price fluctuations are affected by various factors and market styles are constantly changing. Therefore, investors need to adjust their portfolio positions and switch between different industries or assets to capture various opportunities. In this paper, we study the timing strategy based on the VIX index by combining the timing signals of the VIX index to guide the allocation of long and short positions. The rotation strategy focuses on the non-popular industries and the industry index is reasonably allocated as a long asset. At the same time, through the resistance indicator, we exclude some short-term downturn risky industries, making the portfolio return less volatile and more sensitive to the short-term investment opportunities. The investment strategy proposed in this paper provides investors with an analytical tool that combines a timing strategy with a rotation strategy. The strategy has a good performance, generalization ability and a relatively stable return performance both insample and out-of-sample.

KEYWORDS:
VIX, Timing, Industry Rotation, Momentum Factor, Technical Indicators