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Bear, Bull, Sidewalk, and Crash: The Evolution of the US Stock Market Using Over a Century of Daily Data

Author

Listed:
  • Shixuan Wang

    (Department of Economics, University of Reading, Reading, RG6 6AA, United Kingdom)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Yue-Jun Zhang

    (College of Business Administration, University of Nebraska at Omaha, 6708 Pine Street, Omaha, NE 68182, USA)

Abstract

In this paper, we employ a four-state hidden semi-Markov model (HSMM), which outperforms a hidden Markov model (HMM), to identify market conditions of the Dow Jones Industrial stock market over the daily period of 16th of February, 1885 to 4th of June, 2020. Our results indicate that the four hidden states represent bear-, bull-, sidewalk-, and crash-markets, which in turn appropriately captures the various major historical events during the period of study. Our results have implications for investors and policymakers.

Suggested Citation

  • Shixuan Wang & Rangan Gupta & Yue-Jun Zhang, 2020. "Bear, Bull, Sidewalk, and Crash: The Evolution of the US Stock Market Using Over a Century of Daily Data," Working Papers 202097, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202097
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    Cited by:

    1. Kirby, Chris, 2023. "A closer look at the regime-switching evidence of bull and bear markets," Finance Research Letters, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Dow Jones Industrial Average; Stock Returns; Hidden (semi-)Markov Models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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