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- Title
The Buy-and-Hold Market Timer.
- Authors
Trainor, William J.
- Abstract
This study examines whether the S&P 500 earnings yield minus the 10-year Tbond yield (often referred to as the Fed model) can signal an overvalued market and be used to occasionally exit the market and outperform a simple buy-and-hold strategy both in return and risk metrics. Results show that when the S&P 500 earnings yield minus the 10-year T-bond yield is in the bottom decile relative to a 10-year moving average, the probability of a market decline over the next year increases from 28% at any time to more than 65%. Relying on this signal to exit the market and returning when the spread moves to normal levels, or after a set decline barrier is reached, results in a positive expected excess return of 5% or more with a lower risk profile stemming from being temporarily out of the market.
- Subjects
UNITED States; STANDARD &; Poor's 500 Index; BUY-and-hold investing; RATE of return on government securities; RATE of return on stocks; STOCK exchanges
- Publication
B>Quest, 2018, p1
- ISSN
1084-3981
- Publication type
Article