Leading Economic Indicator and Global Stock Market Returns

Abstract

Feldman, Jung, and Klein’s 2015 paper finds that the combination of The Conference Board’s Leading Economic Indicator (LEI) and a 200-day simple moving average outperforms a buy and hold strategy on an absolute and risk-adjusted basis for the US stock market. We propose to examine whether the results for the US market hold for markets outside the United States in addition to the US stock market. Results indicate the LEI and 200-day moving average strategy holds for six of the eight markets, namely the United States, Germany, France, Japan, South Korea, and Mexico, outperforming a buy and hold strategy on an absolute and risk adjusted basis. Nevertheless, statistical results provided mixed results on the statistical significance of the investment timing results. Other results indicate that examining LEI across markets can be useful for timing the US market.