The Information Content of the Gilt-Equity Yield Ratio

Eric J Levin and Robert E. Wright ()

The Manchester School of Economic & Social Studies, 1998, vol. 66, issue 0, pages 89-101

Abstract: In principle, the gilt-equity yield ratio (GEYR) can be used as a decision criterion for choosing between equity and bonds because the GEYR is sensitive to miss-pricing. However, the GEYR is also influenced by other variables. Consequently, observed movement in the GEYR cannot be confidently attributed to miss-pricing without controlling for the other variables which might cause the GEYR to vary. This paper demonstrates that the GEYR can be used as a signal to switch profitably between equity and bonds provided that the GEYR threshold value indicating a profitable switch is adjusted to incorporate changes in variables such as expected inflation and the equity risk premium. Simple empirical experiments are carried out aimed at evaluating how well the GEYR performs as a trading rule. Copyright 1998 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1998
View citations in EconPapers

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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: http://EconPapers.repec.org/RePEc:bla:manch2:v:66:y:1998:i:0:p:89-101

Access Statistics for this article

More articles in The Manchester School of Economic & Social Studies from Blackwell Publishing
Series data maintained by Christopher F. Baum ().