Short-term market timing using the bond-equity yield ratio

Pierre Giot and Mikael Petitjean

The European Journal of Finance, 2009, vol. 15, issue 4, 365-384

Abstract: This paper takes a new look at the market-timing ability of the bond-equity yield ratio (BEYR). We compare the short-term profitability of a naive strategy based on the extreme values of the BEYR to the short-term profitability of a sophisticated strategy relying on regime switches. In contrast to previous studies, we do not document any major international evidence that these dynamic strategies deliver significantly higher risk-adjusted returns than the buy-and-hold portfolios. Moreover, the profitability of these active strategies is not improved when the equity yield, instead of the BEYR, is used as a criterion to time the market.

Keywords: valuation ratio; switching; regime; market timing (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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Working Paper: Short-term market timing using the bond-equity yield ratio (2009)
Working Paper: Short-term market timing using the Bond-Equity Yield Ratio (2006)
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DOI: 10.1080/13518470802466097

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