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Short-term market timing using the Bond-Equity Yield Ratio

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Petitjean, Mikael [FUCAM] Giot, Pierre [FUNDP]

This paper takes a new look at the market timing ability of the Bond-Equity Yield Ratio (BEYR). We compare the short-term profitability of a naive strategy based on the extreme values of the BEYR to the short-term profitability of a sophisticated strategy relying on regime switches. In contrast to previous studies, we do not document any major international evidence that these dynamic strategies deliver significantly higher risk-adjusted returns than the buy-and-hold portfolios. Moreover, the profitability of these active strategies is not improved when the equity yield, instead of the BEYR, is used as criterion to time the market.

Document type Article de périodique (Journal article)
Access type Accès libre
Publication date 2009
Language Anglais
Journal information "European Journal of Finance" - Vol. 15, no. 4, p. 365-384 (Juin 2009)
Peer reviewed yes
Publisher Taylor & Francis
issn 1351-847X
Publication status Publié
Affiliations Louvain School of Management - Accounting & Finance
FUCaM - Sciences de gestion
FUNDP - ECO_CeReFIM (Centre de recherche en finance)
UCL - EUEN/CORE - Center for operations research and econometrics
Keywords Valuation ratio ; Switching ; Regime ; Market timing
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Bibliographic reference Petitjean, Mikael ; Giot, Pierre. Short-term market timing using the Bond-Equity Yield Ratio. In: European Journal of Finance, Vol. 15, no. 4, p. 365-384 (Juin 2009)
Permanent URL http://hdl.handle.net/2078/28927