In predicting stock market returns, academic research has had its primary focus onmacroeconomic variables, and less attention has been paid towards technical indicators.The evidence of the stock return predictability is either absent or...
moreIn predicting stock market returns, academic research has had its primary focus onmacroeconomic variables, and less attention has been paid towards technical indicators.The evidence of the stock return predictability is either absent or weak, and there arecases of contradicting evidence in the literature whether stock returns even are predictable.Over the last ten years, several papers find evidence that stock return predictability existsduring the bad economic states. These papers have used different approaches, whereasmost of them have been using NBER chronology of expansions and recessions, or investorsentiment index, to define good and bad economic times. Based on our knowledge, therehas been limited research regarding the use of bull and bear markets to determine thesemarket states. This thesis reexamines and extends previous studies on the time-varyingstock return predictability. Our research is similar to Huang et al. (2014), as we measurethe performance of different predicto...