%0 Journal Article
%T Are Different National Stock Markets Driven by the Same Stochastic Hidden Variable?
%A Klaus Grobys
%J Review of Finance and Banking
%D 2011
%I Bucharest Academy of Economic Studies
%X The following contribution analyzes linkages between preselected national stockmarkets by a multivariate application of Markov-Switching models. This study shows evidencethat the US-stock market and the German and Swedish stock markets are driven bythe same unobservable stochastic variable. The latent variable causes these stock markets toswitch between highly persistent Bull- and Bear-market regimes which offer strategic markettiming opportunities. An out-of-sample experiment where stock market regimes are simultaneouslyforecasted on a monthly frequency (January 2008 ¡ª December 2010) shows thatan actively managed equity funds being restricted to hold stocks permanently, dominates allpassive trading strategies that account for internationally diversified equity portfolios.
%K regime switching
%K portfolio management
%K international investing
%K predictability
%K stock markets
%U http://rfb.ase.ro/articole/PIV.pdf