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The Finance Professor Podcast is hosted by Linus Wilson. Dr. Wilson earned his Ph.D. in 2007 from Oxford University. He has taught thousands of finance students at all levels. His research is in banking, financial crises, CEO pay, and corporate finance. He has been a source for over two hundred major news stories in the Wall Street Journal, New York Times, Financial Times, and other news organizations. He is a leading scholar on the TARP bank bailouts of the great recession.
Episodes
Friday Jan 20, 2023
Friday Jan 20, 2023
by
Linus Wilson
Abstract
The loan standards question in the Federal Reserve’s quarterly Senior Loan Officer Survey is shown to be predictive of quarterly stock returns a month or two after its release. This is an apparent violation of semi-strong form stock market efficiency. Out-of-sample, we use this signal and develop a simple risk and alpha model to market time the S&P 500. It outperformed the S&P 500 with a Sharpe (1966) ratio of 1.9 versus 0.34 for passive investment.
Keywords: alpha, commercial and industrial loans, investing, loan standards, market efficiency, market timing, stock market, portfolio theory, returns, risk-model, semi-strong form, Senior Loan Officer Survey, Sharpe ratio, survey
JEL Classification: G11, G14, G17, & G21
Wilson, Linus, Profitable Timing of the Stock Market with the Senior Loan Officer Survey (January 21, 2023). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4332525
See all of Dr. Linus Wilson's research at www.financeprofessor.org or www.linuswilson.com
This is not investment advice.
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