Predicting the U.S. bear stock market using the consumption-wealth ratio

Shue-Jen Wu (sjwu@ncnu.edu.tw) and Wei-Ming Lee (ecdwml@ccu.edu.tw)
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Shue-Jen Wu: Department of International Business Studies, National Chi Nan University
Wei-Ming Lee: Department of Economics, National Chung Cheng University

Economics Bulletin, 2012, vol. 32, issue 4, 3174-3181

Abstract: This paper examines the predictive ability of the consumption-wealth ratio for the U.S. bear stock market using quarterly data on the S&P500 index. By evaluating the in-sample and out-of-sample performance with, respectively, the Pseudo-$R^2$ and the quadratic probability score, it is found that the consumption-wealth ratio is a useful leading indicator in predicting bear markets.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2012-11-19
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