Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259741 
Year of Publication: 
2019
Citation: 
[Journal:] Swiss Journal of Economics and Statistics [ISSN:] 2235-6282 [Volume:] 155 [Issue:] 16 [Publisher:] Springer [Place:] Heidelberg [Year:] 2019 [Pages:] 1-17
Publisher: 
Springer, Heidelberg
Abstract: 
Motivated by recent US evidence, we evaluate the predictive power of changes in the weight of large firms in the aggregate stock market ("Goliath vs David" (GVD)) for Swiss stock market returns and bond market returns. Previous research suggests that the asset return dynamics in the US and Switzerland differ markedly. Forecasting Swiss asset returns hence constitutes a challenging "out-of-sample" test for GVD. Over the sample period from January 1999 to December 2017, we find that the Swiss version of GVD exhibits predictive power for Swiss stock and bond market returns even in the presence of global predictors. However, Swiss bond market returns are best predicted by the US term spread.
Subjects: 
Bond market predictability
Risk premium
Stock market
JEL: 
G15
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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