We used a recursive modeling approach to study whether investors could, in real time, have used information on the comovement of stock markets to forecast stock returns in European stock markets for high-technology firms. We used weekly data on returns in the Neuer Markt, the Nouveau Marché, the Alternative Investment Market, and the NASDAQ. We found substantial changes over time in the usefulness of the inter-European and cross-Atlantic comovement of stock markets for predicting stock returns. We also studied how monitoring the comovement of stock markets would have affected the performance of simple trading rules and investor’s markettiming skills.
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1265.
Find related papers by JEL classification: B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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