TRADING STRATEGY USING LEADING ECONOMIC INDICATORS: A CASE STUDY OF SINGAPORE

Abstract

This paper looks into the potential of using leading economic indicators to assist in the investments made in Singapore. The investment horizon is split into periods of expansion and contraction. The trading strategy is to hold stocks during expansion and either hold safer securities, like government bonds, during contraction or short stocks during contraction. The returns from both types of portfolios are compared with each other, and also compared with the returns from a simple buy-and-hold strategy. The return volatility of these portfolios is also measured and compared. This paper analyses if the leading economic indicators can be used to enhance returns from the various portfolios.