La Jolla Economics

Report Detail Summary

The Country Selector

June 21, 2002

We produce quarterly forecasts by applying the Country Selector model to stock market data. 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. Australia, Canada, New Zealand and Hong Kong are expected to outperform the U.S. and as such should be overweighted in the portfolio. The remaining regions are expected to underperform and should be underweighted in the portfolio. The likelihood that the rest of the world will outperform the U.S. during the coming quarter is estimated to be 45%.

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