Jul

26

IsraelTo what extent does the scholarly market or Israel predict the US markets?

Marion Dreyfus comments:

Aside from the timing differential, 6 hours ahead of us, why might Israel even be thought to have any impact on our market, other again than the fact that many investors there are American and they might vote the same way we vote with their shekels and dollars.

(In Israel today there is still a strong feeling of suspicion over markets, since many many Israelis lost their sandals and shirts in a crash some years ago–a huge bubble that hurt many.)

Pitt T. Maner III writes:

It appears that 2 pharmaceutical companies, 2 financial firms, a fertilizer (potash) co., and a telecommunications co. weight about 50% of the TA-100 index. Teva Pharmaceuticals, the biggest stock, took a 6% loss today–otherwise the TA-100 would probably have been positive.

So the connection would seem possibly related to the TA-100 as an early indicator of US demand, possible relationships/sensitivity to currency exchange levels (stronger dollar as positive for drug sales), indicator of relative stability in the Mideast in advance of Monday opens (US oil supply region stability), and future demand for ag commodities–fertilizer sales in advance of planting.

Phil McDonnell writes:

At a lag of a few days the TA-100 'Granger predicts' the US market (SPY) with a statistically significant R squared of 6% (~25% correlation). Details are an exercise for the reader.

 

Oddly some academic papers indicate that the US and Israeli business cycles (using hierarchy analysis) are not nearly as correlated as the stock exchange indices.

It is odd too that Teva was up in 2009 at the time the US markets were down 20% and now Teva has had bad news surrounding competitor drugs and is down near a 52 week low as US markets hover around the 0% YTD mark.

Given the complexity of the correlation it must be the result of something entirely different!

 


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2 Comments so far

  1. A.S. on July 26, 2010 3:10 pm

    According to wikipedia (http://en.wikipedia.org/wiki/List_of_Israeli_companies_quoted_on_the_Nasdaq): “Israel has more companies listed on NASDAQ than any country outside North America. Since the 1980’s almost 200 Israeli companies had an initial public offering on the NASDAQ. Currently, approximately 125 companies are listed (through the years, many have been acquired, merged with other companies or gone out of business).” Therefore, the Israeli stocks listed on the NASDAQ are a bellwether of the U.S. (and global) tech industry.

    By comparison, the Tel Aviv stock exchange (TASE) currently lists approximately 600 companies, about 10% of which (about 60 firms) are dual listed on foreign stock exchanges. And as discussed in a previous comment, a mere 6 companies (1% of the total) constitute about 45% of the cap-weighed TA-100 index. (See here: http://en.wikipedia.org/wiki/TA-100_Index). So the TA-100 index isn’t even a broad indicator of the Israeli economy, much less the U.S. economy.

  2. Matthew on July 26, 2010 7:44 pm

    “ISRAEL is the crucial battlefield for Capitalism and Freedom in our time.”

    –George Gilder

    http://amzn.to/b3etTX

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