La Jolla Economics

Report Detail Summary

The Country Selector

June 23, 2001

We produce quarterly forecasts by applying the Country Selector model to stock market data. Looking at the third quarter; we estimate that Australia has a 47.7% probability of outperforming the U.S. (Table 1). To evaluate our joint forecasts of the relative performance of major foreign markets; we allocate funds to various regions in direct proportion to the difference between the country's probability of outperforming the U.S. This procedure overweights countries or regions with a probability in excess of 50% and underweights those with less than 50% probability. The numbers suggest that on an equal weighted basis the U.S. is likely to be in the middle of the pack. However; as one takes into account the weights of the various countries; the outlook changes dramatically. The likelihood that the rest of the world will outperform the U. S. is estimated to be 39.24%.

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