"Effect of the Business Cycle on Investment Strategies: Evidence from Mexico "

Abstract

The main objective of this research is to analyze whether the business cycle has an effect on investment strategies. In order to ascertain this, we use as methodology, a multifactorial time series analysis. Specifically, we test whether short-term cycle investment strategies and long-term cycle investment strategies can be observed. We use data from the Mexican Stock Exchange, for the period 1993 – 2006. Our results show a statistical evidence of short-term cycle but not for long-term cycle investment opportunities. One of the implications of this discovery is that these results add to the works that challenge the efficient market hypothesis. As a conclusion, this work add some evidence to the writing that link the financial sector with economic activity. In particular, we found some evidence of a relationship between business cycle and short-term investment strategies.