Until this point, we considered the entire sample as one. It could be a logical decision to focus only on some industries. Note that choosing the right industry to invest should not be based on past performance pattern; we rather have to analyze comovements with global economic trends over a number of years, and then, based on our prediction for the coming periods, we should pick the one with the best outlook. This method helps you to determine the right weights of the industries in your portfolio, but then, you still need to select individual shares that may overperform the others.

Of course, once one given industry is selected, we may end up with different investment rules than those on the whole sample. So, we may further improve our investment performance by performing the previously shown steps for each industry separately.

At the same time, recall that the more specific you are in data selection (time period, industry, and firm size), the less likely will...