Equity premium prediction: Are economic and technical indicators unstable?

Arbeitspapier

We show that technical indicators deliver stable economic value in predicting the U.S. equity premium over the out-of-sample period from 1966 to 2014. Results tentatively improve over time and beat alternatives over a large continuum of sub-periods. By contrast, economic indicators work well only until the 1970s, but 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 annualized average Sharpe ratio of 0.55 p.a. (after transaction costs) for investors who had entered the market at any point in time.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: DIW Discussion Papers ; No. 1552

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): Deutsches Institut für Wirtschaftsforschung (DIW)
• (wo): Berlin
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/129207
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ