Do Stock Returns Rebound After Bear Markets? An Empirical Analysis From Five OECD Countries
AbstractThis paper proposes an empirical study of the shape of recoveries in - nancial markets from a bounce-back augmented Markov Switching model. It relies on models rst applied by Kim, Morley and Piger  to the busi- ness cycle analysis. These models are estimated for monthly stock market returns data of ve developed countries for the post-1970 period. Focus- ing on a potential bounce-back e ect in nancial markets, its presence and shape are formally tested. Our results show that i) the bounce-back e ect is statistically signi cant and large in all countries, but Germany where evi- dence is less clear-cut and ii) the negative permanent impact of bear markets on the stock price index is notably reduced when the rebound is explicitly taken into account.
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Bibliographic InfoPaper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2013-21.
Date of creation: 2013
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Stock Market Returns; Markov Switching Models; Shape of Bounce- Back;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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