Market Timing of International Stock Markets Using the Yield Spread

Posted: 23 Jan 2004

See all articles by Bruce G. Resnick

Bruce G. Resnick

Wake Forest University - Schools of Business

Wendy Liu

University of Kentucky; Texas A&M University

Gary Shoesmith

Wake Forest University - School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

We extend probit modeling to forecast a bear stock market in the United States and eight major foreign stock markets. In general, we find that the U.S. yield spread contains more important market-timing information than does the home-country yield spread for profitable market timing. At a 35% probability screen, our simulations show that the U.S. dollar (representative local-currency) investor could earn a median compound annual return across eight foreign (non-U.S.) stock markets of 15.75% (17.67%) from following a market-timing strategy versus a median buy-and-hold return of 13.56% (16.55%).

JEL Classification: G14, G15

Suggested Citation

Resnick, Bruce G. and Liu, Wei and Shoesmith, Gary, Market Timing of International Stock Markets Using the Yield Spread. Journal of Financial Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=475961

Bruce G. Resnick (Contact Author)

Wake Forest University - Schools of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7659
United States
336-758-4581 (Phone)
336-758-4514 (Fax)

Wei Liu

University of Kentucky ( email )

Gatton College of Business and Economics
Lexington, KY 40506
United States

Texas A&M University ( email )

351E Wehner
College Station, TX 77843-4218
United States
979-458-4520 (Phone)

Gary Shoesmith

Wake Forest University - School of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
336-758-5053 (Phone)
336-758-4514 (Fax)

HOME PAGE: http://business.wfu.edu/directory/gary-l-shoesmith/

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