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Predicting the U.S. bear stock market using the consumption-wealth ratio

  • Shue-Jen Wu

    ()

    (Department of International Business Studies, National Chi Nan University)

  • Wei-Ming Lee

    ()

    (Department of Economics, National Chung Cheng University)

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    This paper examines the predictive ability of the consumption-wealth ratio for the U.S. bear stock market using quarterly data on the S&P500 index. By evaluating the in-sample and out-of-sample performance with, respectively, the Pseudo-$R^2$ and the quadratic probability score, it is found that the consumption-wealth ratio is a useful leading indicator in predicting bear markets.

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P305.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 32 (2012)
    Issue (Month): 4 ()
    Pages: 3174-3181

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    Handle: RePEc:ebl:ecbull:eb-12-00785
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