An interesting association may be uncovered if we test the interest rates of government securities with the stock market. Using monthly or weekly data we uncover that predicting stocks using the rate of change of interest rates, i.e. the one month rate of change which is the current value subtracted from the previous month rate of change, is a profitable system as well as the weekly rate of change, i.e. the 2 week rate of change produced the best results. These two systems produced positive profits that were quite high. Therefore, we can say that the 1 month rate of change of goverment interest rates as well as the 2- week rate of change of the same government securities is producing good results. Results showed that interest rates needed to move quite higher before they were able to influence the stock market. Small changes to the interest rates did not show any association with the stock market, therefore, in the end the interest rates ROC may not be a useful indicator, unless the interest rates raised, or lowered substantially.
Another association can be made that when interest rates are low, they show profitability towards the stock market, but when they are raised above a theshold value then they begin to influence the stock market. Therefore, low values of government interest rates do not have any correlation with the stock market. Interest rates need to move to higher values rather than stay at low values in order to have influence with the stock market.
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