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

Author

Listed:
  • Shue-Jen Wu

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

  • Wei-Ming Lee

    () (Department of Economics, National Chung Cheng University)

Abstract

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.

Suggested Citation

  • Shue-Jen Wu & Wei-Ming Lee, 2012. "Predicting the U.S. bear stock market using the consumption-wealth ratio," Economics Bulletin, AccessEcon, vol. 32(4), pages 3174-3181.
  • Handle: RePEc:ebl:ecbull:eb-12-00785
    as

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    References listed on IDEAS

    as
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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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