EconPapers    
Economics at your fingertips  
 

Equity premium prediction: Are economic and technical indicators instable?

Fabian Baetje and Lukas Menkhoff

No 1987, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: 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.

Keywords: equity premium predictability; economic indicators; technical indicators; break tests (search for similar items in EconPapers)
JEL-codes: G12 G17 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/106802/1/817180249.pdf (application/pdf)

Related works:
Journal Article: Equity premium prediction: Are economic and technical indicators unstable? (2016) Downloads
Working Paper: Equity Premium Prediction: Are Economic and Technical Indicators Unstable? (2016) Downloads
Working Paper: Equity premium prediction: Are economic and technical indicators instable? (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1987

Access Statistics for this paper

More papers in Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2025-03-22
Handle: RePEc:zbw:ifwkwp:1987