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Modeling Turning Points in the Global Equity Market

Author

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  • Ahelegbey, Daniel Felix
  • Billio, Monica
  • Casarin, Roberto

Abstract

Turning points in financial markets are often characterized by changes in the direction and/or magnitude of market movements with short-to-long term impacts on investors’ decisions. A Bayesian technique is developed for turning point detection in financial equity markets. The interconnectedness among stock market returns from a piece-wise network vector autoregressive model is derived. The turning points in the global equity market over the past two decades are examined in the empirical application. The level of interconnectedness during the Covid-19 pandemic and the 2008 global financial crisis are compared. Similarities and most central markets responsible for spillover propagation emerged from the analysis.

Suggested Citation

  • Ahelegbey, Daniel Felix & Billio, Monica & Casarin, Roberto, 2024. "Modeling Turning Points in the Global Equity Market," Econometrics and Statistics, Elsevier, vol. 30(C), pages 60-75.
    • Handle: RePEc:eee:ecosta:v:30:y:2024:i:c:p:60-75
    DOI: 10.1016/j.ecosta.2021.10.004
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    More about this item

    Keywords

    Bayesian inference; Dynamic Programming; Turning points; Networks; VAR;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises

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