Is the gilt-equity yield ratio useful for predicting UK stock returns?
Clare, A.D., Thomas, S.H. and Wickens, M.R. (1994) Is the gilt-equity yield ratio useful for predicting UK stock returns? Economic Journal, 104, (423), 303-315.
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The ratio of a long government bond yield to the equity market dividend yield, the Gilt-Equity Yield Ratio (GEYR), is commonly used by analysts in the UK as a means of determining the cheapness of equity investment relative to investment in gilts. Analysts use the ratio to predict future movements in equity prices using buy/sell thresholds, implicitly assuming that there is a long-run arbitrage relation between the equity market and the government bond market. A formal econometric analysis confirms that the GEYR is indeed a useful predictor of equity returns in the UK.
|Subjects:||H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management|
|Divisions:||University Structure - Pre August 2011 > School of Management
|Date Deposited:||12 Feb 2007|
|Last Modified:||27 Mar 2014 18:23|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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