Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 5, 2020 erstellt
Beschreibung:
Capital mobility may equalize investment opportunities across industries, and further, may cause the return-risk trade-offs of industry portfolios to converge. We show that over an extended period from 1926 to 2014, value-weighted industry portfolios based on Fama-French 5, 10, 12, 17, 30, and 49 industry classifications have Sharpe ratios that are statistically indistinguishable from each other. We further show that industry Sharpe ratios exhibit mean-reversion and such mean reversion can be attributed to cross-industry capital mobility, in that industries with higher Sharpe ratios tend to have higher capital investments subsequently. Finally, we examine the performance of an investment strategy that is explicitly based on the assumption of equal Sharpe ratios across industry portfolios. Various versions of this strategy significantly outperform the market portfolio and their performance is closely related to the investment and profitability factors. Our findings reveal an important effect of cross-industry capital mobility on asset pricing