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Testing for Exceptional Bulls and Bears: a Non-Parametric Perspective

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Author Info

  • Candelon Bertrand
  • Metiu Norbert

    (METEOR)

Abstract

This paper investigates exceptional phases of stock market cycles. Defined in Pagan and Sossounov (2003) as unusual, they are detected as outliers in the historical distribution. Moreover, this study completes the growing literature on stock market bulls and bears in several aspects. First,it extends the description of financial cy- cles by going beyond solely the duration feature. Second, a new strategy to test for single and multiple outliers is presented. Based on this procedure, the exceptional bulls and bears that occurred since 1973 are detected. A complementary analysis deals with the specific cross-country patterns of the current sub-prime crisis. Our results are mixed, in the sense that they do not support the idea that the ongoing bear is exceptional for all the analyzed countries. Moreover, the results indicate that the stock market indices are still far away from the thresholds beyond which the current bear phase will become exceptional worldwide.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 017.

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Date of creation: 2009
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Handle: RePEc:unm:umamet:2009017

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Keywords: monetary economics ;

References

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  1. Barsky, Robert B. & Long, J. Bradford De, 1990. "Bull and Bear Markets in the Twentieth Century," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 50(02), pages 265-281, June.
  2. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, Elsevier, vol. 132(1), pages 59-79, May.
  3. Máximo Camacho & Gabriel Pérez-Quirós & Lorena Saiz, 2005. "Do european business cycles look like one?," Banco de Espa�a Working Papers, Banco de Espa�a 0518, Banco de Espa�a.
  4. Coakley, Jerry & Fuertes, Ana-Maria, 2006. "Valuation ratios and price deviations from fundamentals," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(8), pages 2325-2346, August.
  5. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1164, Econometric Society.
  6. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number bry_71-1.
  7. Javier Gómez Biscarri & Fernando Pérez de Gracia, 2002. "Stock Market Cycles and Stock Market Development in Spain," Faculty Working Papers, School of Economics and Business Administration, University of Navarra 01/02, School of Economics and Business Administration, University of Navarra.
  8. Chen, Shiu-Sheng, 2009. "Predicting the bear stock market: Macroeconomic variables as leading indicators," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(2), pages 211-223, February.
  9. Adrian R. Pagan & Kirill A. Sossounov, 2003. "A simple framework for analysing bull and bear markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 18(1), pages 23-46.
  10. Biscarri, Javier GÛmez & Fernando PÈrez de Gracia, 2002. "Bulls and Bears: Lessons from some European Countries," Royal Economic Society Annual Conference 2002, Royal Economic Society 28, Royal Economic Society.
  11. Candelon, Bertrand & Piplack, Jan & Straetmans, Stefan, 2008. "On measuring synchronization of bulls and bears: The case of East Asia," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(6), pages 1022-1035, June.
  12. Longin, Francois M, 1996. "The Asymptotic Distribution of Extreme Stock Market Returns," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 69(3), pages 383-408, July.
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