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Can the Forecasts Generated from E/P Ratio and Bond Yield be Used to Beat Stock Markets?

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Author Info
Wing-Keung Wong () (National University of Singapore)
Boon-Kiat Chew () (Independent Economic Analysis (Holdings) Limited)
Douglas Sikorski () (National University of Singapore)

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Abstract

This study tests the performance of stock market forecasts derived from technical analysis by means of a specific indicator. The indicator is computed from E/P ratios and bond yields. Several stock markets are studied over a 20-year period. Two test statistics are introduced to utilize the indicator. The results show that the forecasts generated from the indicator would enable investors to escape most of the crashes and catch most of the bull runs. The trading signals provided by the indicator can generate profits that are significantly better than the buy-and-hold strategy.

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Publisher Info
Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0201.

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Length: 33 pages
Date of creation: 2002
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Handle: RePEc:nus:nusewp:wp0201

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Related research
Keywords: Yield differential; Standardized yield differential; E/P ratio; bond yield; interest rate;

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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  5. Levich, Richard M. & Thomas, Lee III, 1993. "The significance of technical trading-rule profits in the foreign exchange market: a bootstrap approach," Journal of International Money and Finance, Elsevier, vol. 12(5), pages 451-474, October. [Downloadable!] (restricted)
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  7. Campbell, John Y., 1987. "Stock returns and the term structure," Journal of Financial Economics, Elsevier, vol. 18(2), pages 373-399, June. [Downloadable!] (restricted)
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  8. Wing-Keung Wong & Robert B. Miller & Keshab Shrestha, 2002. "Maximum Likelihood Estimation of ARMA Model with Error Processes for Replicated Observations," Departmental Working Papers wp0217, National University of Singapore, Department of Economics. [Downloadable!]
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  12. Balvers, Ronald J & Cosimano, Thomas F & McDonald, Bill, 1990. " Predicting Stock Returns in an Efficient Market," Journal of Finance, American Finance Association, vol. 45(4), pages 1109-28, September. [Downloadable!] (restricted)
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  1. Wing-Keung Wong & Meher Manzur & Boon-Kiat Chew, 2002. "How Rewarding Is Technical Analysis? Evidence From Singapore Stock Market," Departmental Working Papers wp0216, National University of Singapore, Department of Economics. [Downloadable!]
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