[Dow Jones] No portfolio manager would admit that 'window dressing' is an essential part of their actions close to year-end, says Societe Generale, though house says its backtests prove that "when getting closer to year-end, playing a momentum-based strategy (going long past outperformers, shorting past under performers) has more than a 50% chance of success across the full spectrum of asset classes." Says it's highly probable, therefore, risky assets will do well by year-end. Notes test from 1994-2008 show window dressing play has "exceptionally" high, consistent rate of success in FX markets (80% chance of success, with expected return of 7.7%). Equity markets "can also be highly rewarding, with expected returns close to or higher than 5%," with highest chances of success in Europe (93%), U.K. (87%), emerging BRIC (80%). Adds, some success in fixed income, commodity markets, though with low expected return. SocGen says optimal strategy consists of buying the 20 top performers, selling the 20 worst-performers on Dec 1 every year, unwinding position on last day of December.
Dow Jones Newswires
October 19, 2009 20:31 ET (00:31 GMT)
Copyright (c) 2009 Dow Jones & Company, Inc.
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