Equity premium prediction: Are economic and technical indicators instable?

Arbeitspapier

We show that technical indicators deliver economic value in predicting the U.S. equity premium. A crucial element of this value stems from the stability of return predictability over the full sample period from 1950 to 2013. Results tentatively improve over time and beat alternatives over sub-periods. By contrast, economic indicators work well only until the 1970s, thereafter they lose predictive power, even when the last crisis is considered. Translating the predictive power of technical indicators into a standard investment strategy delivers an average Sharpe Ratio of 0.6 p.a. for investors who had entered the market at any point in time.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Kiel Working Paper ; No. 1987

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Forecasting and Simulation ; Asset Pricing; Trading Volume; Bond Interest Rates
• Thema: equity premium predictability ; economic indicators ; technical indicators ; break tests

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Baetje, Fabian ; Menkhoff, Lukas
• Ereignis: Veröffentlichung
• (wer): Kiel Institute for the World Economy (IfW)
• (wo): Kiel
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/106802
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ