Template-type: ReDIF-Paper 1.0
Author-Name: Adrian Fernandez-Perez
Author-Workplace-Name: Departamento de Métodos Cuantitativos, Facultad de Ciencias Económicas y Empresariales, Universidad de Las 
	Palmas de Gran Canaria.
Author-Name: Fernando Fernández-Rodríguez
Author-Workplace-Name: Departamento de Métodos Cuantitativos, Facultad de Ciencias Económicas y Empresariales, Universidad de Las 
	Palmas de Gran Canaria.
Author-Name: Simón Javier Sosvilla Rivero
Author-Workplace-Name: Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de Madrid.
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Title: The term structure of interest rates as predictor of stock returns: Evidence for the IBEX 35 during a bear market
Abstract: We present a model to forecast the probability of bear markets in the Spanish IBEX 35 with a congruent and concise 
	parameterization which selects the explanatory factors from a wide set of variables like the yield curve of Spain, US and 
	Europe, as well as several macro variables, and numerous leading indicators.
	To this end, we first use a data-guided algorithm to select an in-sample optimal Probit model that is employed as a benchmark. 
	We then form alternative Probit models obtained from combinations of levels, slopes and/or curvatures in the yield curve of 
	Spain, US and Europe, as well as several macro variables and compare their estimated probability of bear markets in the 
	out-of-sample period with that from the benchmark model. Our results suggest that the slopes of US and Europe yield curves have 
	some information content (not implicitly present in the slope of the Spanish yield curve) that helps to better forecast the 
	probability of bear markets in the IBEX 35.
Classification-JEL: C20, E43, G15.

Keywords: Term structure of interest rates, Stock returns, Trading strategies.
Note: Publicado en:International Review of Economics and Finance, 2014, Vol. 31 . pp. 21-33. Elsevier. doi:10.1016/j.iref.2013.12.004
Length: 29 pages 
Creation-Date: 2013 
Number: 2013-19 
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1319.txt
File-URL: https://eprints.ucm.es/id/eprint/21801/1/1319.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1319