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Stock Market Timing and Government Bond Yield Spread: An emerging and established market analysis

Tokarev, Roman and Pagliano, Guiseppe (2009)
Department of Economics
Abstract
The aim of the paper is to time the stock market by using probit modelling. We will accomplish this task by testing the significance of different financial variables. The yield spread, which has already been proved to be effective for several established markets, will play a central role in our analysis.
Primarily we will extend the analysis of Liu, Resnick and Shoesmith (2004) to verify whether the slope of the U.S. yield curve can offer important information also to time the Italian stock market, thus providing the opportunity to construct a better portfolio as compared to the benchmark of the buy-and-hold strategy on the stock market. However, we will also attempt to test a modified version of the model for the emerging Russian stock... (More)
The aim of the paper is to time the stock market by using probit modelling. We will accomplish this task by testing the significance of different financial variables. The yield spread, which has already been proved to be effective for several established markets, will play a central role in our analysis.
Primarily we will extend the analysis of Liu, Resnick and Shoesmith (2004) to verify whether the slope of the U.S. yield curve can offer important information also to time the Italian stock market, thus providing the opportunity to construct a better portfolio as compared to the benchmark of the buy-and-hold strategy on the stock market. However, we will also attempt to test a modified version of the model for the emerging Russian stock market and we will eventually test the effectiveness of other financial variables within a framework of out-of-sample forecasting. Moreover, we will change some parameters in the model, such as the definition of the dependent binary variable or the frequency of the data, and explain the changes in the
empirical findings. Contrary to the academic prospective which is futile to beat the market and given the objective difficulties in finding effective market timing strategy, we want to show how a relatively simple model can offer a fairly reliable solution to the choice of timing the investments on the stock
market. (Less)
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author
Tokarev, Roman and Pagliano, Guiseppe
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Stock market, Government Bond Yield, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1848854
date added to LUP
2009-06-24 00:00:00
date last changed
2011-06-01 12:43:56
@misc{1848854,
  abstract     = {The aim of the paper is to time the stock market by using probit modelling. We will accomplish this task by testing the significance of different financial variables. The yield spread, which has already been proved to be effective for several established markets, will play a central role in our analysis.
Primarily we will extend the analysis of Liu, Resnick and Shoesmith (2004) to verify whether the slope of the U.S. yield curve can offer important information also to time the Italian stock market, thus providing the opportunity to construct a better portfolio as compared to the benchmark of the buy-and-hold strategy on the stock market. However, we will also attempt to test a modified version of the model for the emerging Russian stock market and we will eventually test the effectiveness of other financial variables within a framework of out-of-sample forecasting. Moreover, we will change some parameters in the model, such as the definition of the dependent binary variable or the frequency of the data, and explain the changes in the
empirical findings. Contrary to the academic prospective which is futile to beat the market and given the objective difficulties in finding effective market timing strategy, we want to show how a relatively simple model can offer a fairly reliable solution to the choice of timing the investments on the stock
market.},
  author       = {Tokarev, Roman and Pagliano, Guiseppe},
  keyword      = {Stock market,Government Bond Yield,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Stock Market Timing and Government Bond Yield Spread: An emerging and established market analysis},
  year         = {2009},
}