The term structure of interest rates as predictor of stock returns: Evidence for the IBEX 35 during a bear market

Adrian Fernandez-Perez, Fernando Fernández-Rodríguez and Simon Sosvilla-Rivero

International Review of Economics & Finance, 2014, vol. 31, issue C, 21-33

Abstract: A Probit model to forecast the probability of bear markets in the Spanish IBEX 35 is presented, being the explanatory factors selected from a wide set of economic variables like the yield curve of Spain, US and Europe, several macro variables, and numerous leading indicators. A data-guided algorithm is used to render a concise parameterization of this optimal model. Our results suggest that the slopes of US and Europe yield curves have some information content (not implicitly present in the slope of the Spanish yield curve) that helps to better forecast the probability of bear markets.

Keywords: Term structure of interest rates; Stock returns; Trading strategies (search for similar items in EconPapers)
JEL-codes: C20 E43 G15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056013001378
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The term structure of interest rates as predictor of stock returns: Evidence for the IBEX 35 during a bear market (2013)
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:eee:reveco:v:31:y:2014:i:c:p:21-33

DOI: 10.1016/j.iref.2013.12.004

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().