Monday, August 27, 2012

Bernanke's Paper on Interest Rate Spreads

Came across Ben Bernanke's On The Predictive Power of Interest Rates and Interest Rate Spreads at Google Scholar. The paper asserts that some interest rate variables, especially the Commercial Paper - Treasury Bill rates, have served well as economic state predictors of following periods.

Did it apply for equity investments?

Here we have the Commercial Paper / T. Bill spread for the period from Bernanke's paper along with the S&P500 index for the same period. The spread appears to have a generally negative correlation to equity values.

 Predictive powers would probably be limited, especially now that we're in 2012 and market participants, products have changed dramatically.

0 Reflections: