Market Timing of International Stock Markets Using the Yield Spread

Abstract

We use probit modeling to forecast bear stock markets in the United States and in 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%) by following a market-timing strategy versus a median buy-and-hold return of 13.56% (16.55%). 2004 The Southern Finance Association and the Southwestern Finance Association.

Yield curve inversions: A study of country‐level and firm‐level stock reactions

“…Our study also differs from prior research by taking a short-term perspective. Moreover, our results (un-tabulated) of individual country's stock market reactions to US inversions add to the literature that investigates the relation between the United States yield curve and international stock markets (e.g., Liu, Resnick, & Shoesmith, 2004;McCown, 2001).…”

Does the size of a fund family matter when choosing an investment strategy? Evidence from spain

“…Other outstanding works on market timing include Lin et al (2004), who analyze market timing in international stock markets; Chen and Liang (2005), who develop a new model that enables them to test returns timing and volatility timing at the same time; Hovakimian (2006), who concludes that debt transactions exhibit timing patterns; and Jenter (2005), who concludes that managers' portfolio decisions are closely linked to changes in corporate capital structures.…”

A probit-based analysis of the deep stock market drawdowns

“…Resnick and Shoesmith (2002) also provide an out-of-sample simulation and find that “a market timer switching out of stocks (T-bills) into T-bills (stocks) one month before a bear (bull) stock market could have realized a compound annual return of 16.46% versus 14.17% from a stock-only buy-and-hold strategy”. Liu et al . (2004) confirm the similar results with the international stock markets.…”