The profitability of style rotation strategies in the United Kingdom -: Depends on temporal volatility of underlying return spread between styles.

The authors investigate the profitability of size and value/growth rotation strategies in the United Kingdom over the last thirty years after adjusting for various levels of forecasting skills and transaction costs. Furthermore, the authors link the size and value/growth style spreads with a number of business cycle variables, and assess trading rules built upon their ex ante predictions. Their fundings provide strong support for small versus large, but not value versus growth style rotation strategies.