1)Describe the sector rotation strategy in the context of portfolio management 2)Explain the role of futures...

1)Describe the sector rotation strategy in the context of portfolio management

2)Explain the role of futures cleaning houses in counterparty risk mitigation

Please explain with your own words (approx. 200 words for each)

Solutions

Expert Solution

1. Sector rotation strategy is a strategy in portfolio management in which various sectors are rotated according to the various trend in the market.

there is always a sectoral leadership in the market at a particular point of time and investors should be looking for those sectors to make the most of money and being invested in that sector, and when that sector started to fall the investors should be booking on his profit, and he would be starting onto investing into a new sector.

it can be exampled through the recent event of the coronavirus when the pharmaceutical stocks are starting to go up, and all those defensive companies are also starting to go up, so an active investor who was highly investor in high beta stocks and airlines stock would be switching from those stocks to pharmaceutical stocks, and retail stocks which are defensive in nature in order to maximize his gains in the overall portfolio so that he can gain through the sectoral rotation.

So, it can be said that the sectoral rotation is a policy of portfolio management through which the leadership of various sectors in the market is exploited and it is invested in order to, gain the most from it, and it is being rotated as the economic cycle keeps on changing

jeff jeffy answered 1 year ago

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