Referierte Aufsätze Web of Science
Fabian Baetje, Lukas Menkhoff
In: International Journal of Forecasting 32 (2016), 4, S. 1193-1207
We show that technical indicators deliver stable economic value in predicting the US equity premium over the out-of-sample period from 1966 to 2014. The results tentatively improve over time, and beat alternatives over a large continuum of sub-periods. In contrast, economic indicators work well only until the 1970s, but lose predictive power thereafter, even when considering the last crisis. Translating the predictive power of technical indicators into a standard investment strategy delivers an annualized average Sharpe ratio of 0.55 p.a. (after transaction costs) for investors who entered the market at any point in time.
Keywords: Equity premium predictability, Economic indicators, Technical indicators, Break tests
DOI:
http://dx.doi.org/10.1016/j.ijforecast.2016.02.006