Market Timing with GEYR in Emerging Stock Market: The Evidence from Stock Exchange of Thailand

Abstract

This paper aims to examine whether the market timing strategy with Gilt-Equity Yield Ratio or GEYR can create abnormal returns in Thai Stock market. The trading rules using GEYR are established and switching strategies between bonds and equities are implemented. The out-of-sample profitability of these switching strategies compared with the simple buy-and-hold strategy. The result shows that switching strategies using GEYR can provide higher return but lower risk than buy-and-hold equity portfolio, even after the transactions costs are considered. Although these switching strategies cannot be fully utilized in some types of funds because there are some restrictions under investment policies, the result reveals that switching portfolios can still be more efficient than buy-and-hold portfolios.

Keywords: Trading Strategies, Market Timing, Gilt-Equity Yield

JEL Classification: G11