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Short-term market timing using the bond-equity yield ratio

  • Pierre Giot
  • Mikael Petitjean

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 a criterion to time the market.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470802466097
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Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 15 (2009)
Issue (Month): 4 ()
Pages: 365-384

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Handle: RePEc:taf:eurjfi:v:15:y:2009:i:4:p:365-384
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