Is the gilt-equity yield ratio useful for predicting UK stock returns?
Is the gilt-equity yield ratio useful for predicting UK stock returns?
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.
303-315
Clare, A.D.
e9a9923a-dee5-4521-a5e1-d404befa7069
Thomas, S.H.
51ff3b62-89ae-4190-8a9e-ed4a76c8297c
Wickens, M.R.
bc800f3e-7a1b-4884-b669-2d874983d421
March 1994
Clare, A.D.
e9a9923a-dee5-4521-a5e1-d404befa7069
Thomas, S.H.
51ff3b62-89ae-4190-8a9e-ed4a76c8297c
Wickens, M.R.
bc800f3e-7a1b-4884-b669-2d874983d421
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), .
Abstract
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.
This record has no associated files available for download.
More information
Published date: March 1994
Organisations:
Management
Identifiers
Local EPrints ID: 37385
URI: http://eprints.soton.ac.uk/id/eprint/37385
ISSN: 0013-0133
PURE UUID: 0a8af8b9-c7fe-420e-be39-228b18a54bff
Catalogue record
Date deposited: 12 Feb 2007
Last modified: 11 Dec 2021 15:36
Export record
Contributors
Author:
A.D. Clare
Author:
S.H. Thomas
Author:
M.R. Wickens
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics