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Demarcating stable and turbulent regimes in Taiwan's stock market

Author

Listed:
  • Yu-Lieh Huang

    (National Tsing-Hua University)

  • Chia-Wen Ho

    (University of North Carolina at Charlotte)

Abstract

Various trading rules involving derivatives have been widely applied by practitioners under a wide range of market conditions to date, however, few econometric models can provide a way to accurately decide when to apply those strategies. In this paper, we employ the Innovation Regime-Switching (IRS) model (Kuan, et al, 2005, JBES) to separate stock price sample periods into stable and turbulent regimes on the basis of their dynamic behaviors. Our results show that, based on regime identification, we can obtain satisfactory profits by implementing appropriate and timely derivative strategies.

Suggested Citation

  • Yu-Lieh Huang & Chia-Wen Ho, 2008. "Demarcating stable and turbulent regimes in Taiwan's stock market," Economics Bulletin, AccessEcon, vol. 3(35), pages 1-11.
    • Handle: RePEc:ebl:ecbull:eb-07c10011
    as

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    References listed on IDEAS

    as
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    Keywords

    Bear market;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G1 - Financial Economics - - General Financial Markets

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